I agree with Kevin Drum, this is the dumbest thing I have read today:
There is a solution to the rising cost of oil, but it is a painful
one. Let's say there is a lot of $20-a-barrel oil in the world "”
deep-sea oil, Canadian tar sands. But who would look for $20-a-barrel
oil if someone else (Saudi Arabia) has lots of $5-a-barrel oil? The
answer is: no one.
Basically, American taxpayers have to guarantee potential producers
that the price in the future will not fall below $20 a barrel and that
they will not lose their investments.
This is easy to do. The U.S. needs to guarantee that it will buy all
of its oil at $20 a barrel before buying anything from OPEC. This
forces the price of oil down to $20 a barrel, but it eliminates the
possibility that it will ever go back to $5 a barrel.
The implication that no one will add capacity if there is anyone at all to the left of them on the supply curve is just silly, and defies history in any number of industries, including oil. By this argument, no one would be building super-deep water oil platforms today. The reason there is not more oil exploration today in certain areas of North America is that there are formal and informal government restrictions that make it hard and/or impossible. And to the extent that oil companies are treating current oil prices as a bubble that will inevitably fall, all I can say is, bring it on.