Where is the increased oil production to meet demand?
Not mentioned is the idiocy of Democrats who have a policy of strangling the domestic supply of oil. They refuse to permit drilling in Alaska and off shore areas of the US that would produce enough oil to do away with the need to import. Since the NY Times favors the strangulation policy it is not surprising that it is not mentioned in the article. The Democrats actually like the high prices, they just hate that the money is going to the few producers and the oil companies.
As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supply would rise as producers opened the taps to pump more.
But as prices flirt with $120 a barrel, many energy specialists are becoming worried that neither seems to be happening. Higher prices have done little to attract new production or to suppress global demand, and the resulting mismatch has sent oil prices spiraling upward.
“According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the International Energy Agency, which advises industrialized countries. “They reduce demand and they induce oil supplies. Not this time.”
A key reason that supply is not rising to meet demand is that producers outside of the OPEC cartel — countries like Russia, Mexico and Norway — have been showing troubling signs of sluggishness. Unlike the Organization of the Petroleum Exporting Countries, whose explicit goal is to regulate supply to keep prices up, the other countries are the free traders of the international market, with every incentive to produce flat-out at a time of high prices.
But for a variety of reasons, like sharply higher drilling costs and nationalistic policies that restrict foreign investments, these countries are finding it difficult, if not impossible, to increase output. They seem stuck at about 50 million barrels of oil a day, or 60 percent of the world’s oil supplies, with few prospects for growth.
Countries that are not members of OPEC have been the main source of production growth in the last three decades, as new fields were discovered in Alaska, the North Sea or West Africa. After the collapse of the Soviet Union, new opportunities emerged in Russia and the Caspian Sea.
The Republicans should be taking on the Democrats and the environmental wackos responsible for this strangulation of supplies. The problem is that some in the GOP, like John McCain are just as wacky on the subject. They all should be held accountable for this mess, and not the oil companies who would gladly invest in more production if permitted.