I believe it can happen given time. There are trillions of untapped barrels of oil around the world. The ocean floor itself leaks a huge amount naturally that is going to waste. The brine that makes up the sea is the result of millions of years of such seeps. We are not running out, only running out of what we have at the surface.
Whether we do or do not produce oil in the US is irrelevant to this market. Other countries are reacting on our behalf already, and I'm seeing drilling activity here in Colorado for the first time since I was a child.
Can I challenge anyone to name the #1 country that sells us oil? If you said Saudi Arabia, give yourself a trip to the principal's office. The answer is Canada. Until recently the number two country that sells us oil was Mexico. The Saudi's were number three, and have recently barely surpassed Mexico for our number two spot. The Mexico government can drill within 50 miles of our coastline and have done so. We cannot drill within 250 miles for most states. That's right, they can drill closer to us than we can. Doesn't matter, the thing that matters is the market is reacting.
The Canadians get their oil from the oil flats and primarily from shale. We are the only country in the world with more such shale than Canada has, primarily in Colorado, Utah, a touch in Wyoming and some to the south. I'm from Colorado and follow that research closely, as we don't want to use the same methods the Canadians are using.
There are countries with severe defecits and debts as a percentage of their GDP. The US debt is still fairly low as a % of GDP (post WW2 was our peak if you're wondering). These indebted countries include places like Brazil (inflation central), Mexico, and others. Those countries are willing to go get oil to sell even if we are not willing to produce (often times with drilling technology worse than our own when it comes to environmental issues).
To make a long story shorter: the market is clearly reacting in my opinion. I do not think we will see 70 or 80 dollar per bbl of oil this year. We may or may not see it in 2009 but it is possible. As countries react to the price, two things are happening:
1) People are changing habits or just paying more at the pump. 2) Oil producers are bringing more to the market.
Let's focus on #2 for a minute. Oil producers. The combined percentage of world oil production from US companies only represents 8% of the world's oil market. There are simply a huge number of companies and countries producing oil worldwide. The great percentage (over 70%) of world oil production has been socialized by governments. Those governments want to make money too, and they can make rediculous profits by cranking up every ounce they can for the short run. The whole world is focused on this problem in some capacity, because it is not a problem: it's a profit motive. Bringing oil to market is going to have a much bigger impact on the price of gasoline than anything else we can do IMHO.
Sometimes it is scary - when I read your posts - it is almost at if I am writing them. Some comments. On Oil shale etc. Takes time to ramp up production and lots of capital. Banks are just starting to lend money base on oil priced at over 45 dollars. Problems in producing from shale - Shortage of water and an availability of labor in some of these areas. As far as finding the offshore oil - their is a huge shortage of deep water drilling ships. They take time to build and the 500 million to 1 billion dollar investment in them needs to have high prices to support them. PDE is one company that is switching from shallow to deep water rigs but at a huge cost. Again banks are a little shy - they have been burnt before. Another huge help in the long run is natural gas. Lots of it to be found - more pipelines needed(again takes time) and people have to switch. Then the final ones - conservation and alternates. Conservation can happen quicker. Alternates take investment. Government needs to give us more alternatatives. In the Northeast - big switch to woodstoves - pellet stoves. With fuel oil at 4.50 everyone is panicking. I am in the process of installing a heat pump that will reduce my oil consumption by around half. Will add a woodstove to reduce further on the days when the heat pump is inefficient.
Agreed on shale - there's an experiment here in heating the ground to cause the oil to come up. It literally takes 2 years to produce anything once a site is prepared, then they get about ten years of oil production out of it without digging. Unlike regular oil shale production it requires almost no water, but labor and electricity is a big issue. It nets-out a reasonable ratio of energy, but again, takes years.
The good side is this does not ravage the landscape. No bulldozers used at all.
I'll ask my friend to pass along an article about this and link it when I get back to work. I think it is a Conoco initiative, supported by a research grant from congress years ago. They're in phase two with this technology and phase one was a resounding success.