My doctorate is in economics and I agree with you 100%. Others on this forum have stated that $175/bb is here to stay. I think that may be true in the long run, but I think that long run is only as far away as Congress's willingness to make new supplies available now. There is no reason that we have to accept $175/bb oil now and into the forseeable future. At current prices, remote drilling (ANWR), deep water drilling (OCS), and shale oil and tar sands (most of which is federal land holdings) are all economically viable and we will see those sources tapped. However, there will be no movement to ease the problem until after Nov. In the meantime, the public needs to beat on Congress for a real explanation of why we aren't drilling when we know there's oil to be had. This bullsh@# about not coming on line for 10 years and even if it did, it wouldn't make a difference is simply political nonsense. With a 9% approval rating, you'd think they'd try to do something good for the American consumer...but, no. They have their political agenda and you and I will pay the price. Their behavior is disgusting.
I agree with you, dear colleague, that we need to open up these resources, but we also have to be realistic about their impact on current prices. From the numbers I've seen, ANWR and the OCS aren't going to increase global supply by more than 3%. While that's nothing to sneeze at, and will help some, we shouldn't kid ourselves into think its some kind of panacea. Long-run oil demand elasticity is estimated to be around 0.4. So even if we increase supply by a generous 5%, that's only going to decrease the price by about 5%/0.4 = 12.5%. Nothing to sneeze at, but not all that impressive, either.
As to Rocky Mountain shale, while developing at least some of it may be just barely positive NPV right now, with oil price volatility being what it is, the option value of waiting for prices to move up is probably too high for any company to seriously undertake any large scale development right now. Hence even if we do start leasing it (as I believe we should), it will be quite some time before anyone chooses to start producing from it. Hence shale oil is likely only to help in a very long run.
What sayest thou?