Kid, that DOESN'T MATTER. Law of Supply and Demand: we drill, supply goes up, price goes down.
And if we want energy independence nearly as bad as we CLAIM, we have to drill HERE, and we have to drill NOW, and we have to drill ANYWHERE we have a supply.
The price doesn't go down when SUPPLY goes UP, but when DEMAND goes DOWN. Things like fuel have a consistently high demand. An influx of supply is unlikely to do much to alter the level of demand, and thus not greatly affect the price of fuel.
It would still be nice to lessen our dependence on foreign sources though.
I may have taken macroeconomics 11 years ago, but I do remember that supply has just as much of a effect on price as demand does. If supply increases while demand remains the same, then the price goes down. If it helps, you can consider an increase in supply to be a decrease in the ratio of demand relative to the new level of supply.
For certain products, that might be true, but I find it hard to see why it would be so in this case.
Let's say that a company opens up a bunch of new oil wells in the US. Let us also say that the current OPEC price for oil at that time is $90 a barrel.
In such an instance, what is the US company's incentive to charge only $60 per barrel? Why would they give up $30 a barrel in profits? People are already paying $90, and demand has not waned with that price. Deciding to sell their oil for less is just plain stupid. At most, you might see a slight drop in price, but it would be related to the lower cost of shipping oil from a local source, rather than from across the Atlantic.
Is there then some reason that suddenly having this influx of gas would cause people to want it less? Are people going to drive less often now that there is more oil available? Are New Englanders going to decide that it's the time to convert to wood stoves now that heating oil is so plentiful? Will people really decide that since there is more oil available that they will buy less of it, because it's no longer as rare and valuable?
No. The demand for gas and heating oil will remain high. And it would be fiscally irresponsible for any US drilling company to spontaneously decide that they will charge substantially less than the current "going rate".
Because if the U.S. company charges $60/barrel, an awful lot more people are going to choose them over the other companies. In "supply" and "demand", don't forget *competition*.
After all, there wasn't any shortage of department store merchandise before Walmart came along. How do you think they got so big?
Unless that company charging $60 a barrel can put forth a supply large enough to cut into OPEC's own production and profits, it still wouldn't matter; and all they would end up doing is basically give up their own profits. They quickly be bought out or run out of business by companies that took advantage of the profits they could make. That's why Walmart is so big, because they can outproduce their competition. It wouldn't matter how low Walmart's prices were if they only had five of everything at all their stores. Once they were sold out, people would have to go elsewhere and pay the higher price, going Walmart's competition the profits instead.
Remember also, oil prices are basically set in what amounts to a bidding war. What company is going to sell oil for $60 a barrel when the buyer is saying up front that they will go as high as $90 in order to outbid other buyers?
In order to see significantly reduced oil prices, world oil production has to outpace world oil consumption. Taking into account that hundreds of millions of people are going to be entering the "1st world" market in a couple decades, I don't see that happening any time soon no matter how many sites we drill here.
In fact, I have a perfect example of something that shoots the notion of "supply affects price as much as demand" right out of the water...mercilessly.
Steam and Origin.
With these services there is literally an infinite supply of copies of computer games available. Millions, Billions, as many copies of any game as you want!
does this infinite supply change the fact that those games are still $60 a piece at release?
Nope.
Infinite supply. Same price.
The ONLY factor that causes that price to drop over time is demand. When people stop buying a game, the price is lowered in an effort to sell it to people who don't mind spending $20 on a game they find sort of okay. The number of copies available has nothing to do with it.
And of course, demand is rising. China alone will be needing vast quantities of oil in the coming decade and beyond. We have no hope of being able to compete with China in a global free market--i.e. where the consumer sets the price based on what he is willing to pay--since they will soon be able to outbid us, if they can't do it already. Our only hope is that OPEC keeps regulating the production and price and that our allies, such as Canada, continue to sell to us. More reason to increase domestic production.
Note: this is opinion only--I have not researched it. I would be open to being corrected if I'm wrong.
So wait, you're trying to use something with an infinite supply, like software, to prove that the Law of Supply and Demand is wrong? That's a huge logical fallacy right there. That's like trying to disprove 2+2=4 by replacing one of the twos with infinity.
More or less. It would probably be more accurate to say that I've demonstrated how the old Law of Supply and Demand don't necessarily apply in modern economics.
Otherwise, what is your explanation for how an infinite supply has not affected a product's price? Or even its demand?
This is the twenty-first century, and much has changed that seems to fly in the face of tradition economic systems. After all, if you had approached you teachers in that economics course 11 years ago and told them that you were going to start a company that would provide products and services to your clients at absolutely no charge, and that this company would be worth billions of dollars, what would they have said?
An infinite supply only makes the supply side of the equation pointless to calculate; it doesn't invalidate the entire equation.
Besides which, the initial point of discussion was oil, which has a very much finite supply which fluctuates depending on numerous factors.
Also, it's incorrect to claim that Steam is completely free. The program itself is free to the end consumer, yes, but Valve does get a cut from every sale made in their store, much like Xbox Live Arcade or PlayStation Network. They're actually making quite a bit of money off their clients, when you stop to consider that the publishers are as much their clients as the consumers are.
Cite to me how having more gasoline available will make people want to buy it less.
And the billion dollar companies that give stuff away that I was referring to were Google, Youtube, Facebook, Yahoo, and a plethora of other such companies that we use daily at no cost to us, and yet are worth billions.
Actually, computer games follow the ordinary principles of supply and demand because like in every single other instance, they are priced to the maximum amount that the market will bear. Different software is also released at different prices depending on it value relative to other software, just like a brand new Honda Accord with all the pretty baubles and shinies will be sold for a lower price than a Cadillac. No matter how new a game like, say, Minecraft is, it wouldn't ever be released for the price of Mass Effect 3 because ME3 is shinier. Yes, it also represents hundreds of labor hours but even if Minecraft took twice as many labor hours to make, it's still not as shiny.
If you remember your economics, incidentally, fuel products are in a situation of being vastly less sensitive to price than the majority of other products. People will still buy 16 gallons of gasoline at the pump for a long time after the price has become crippling because it, like foodstuffs, is a necessity. That aside, oil and gasoline prices respond very well to increases in supply or other peripheral developments because they are commodities that are partly priced according to the same psychology that governs the stock market. A perceived supply disruption will push the price higher; a perceived supply increase will push it down. If the commodities markets were in their present form at the time of the Trans-Alaska Pipeline construction, announcement of the project would have caused a price decline and completion would have caused a very sharp dip as the completion of TAP represented a gargantuan influx of oil into the world markets; previous to its completion, the oil-rich North Slope might as well have been on the moon in terms of being able to move the oil. Official approval of the Keystone XL extension would have arrested oil price increases because it would have been interpreted as Canadian tar sand oil becoming more readily available, thus representing a supply increase.
Another major factor in oil and gasoline prices, however, is that the government sticks its nose in. Three or four different forms of oil-based fuel represent the entirety of what we pipe into engines to make them go, yet the government has artificially extended this to more than a dozen by arbitrary "blend" requirements and pushing for ineffectual additives (ethanol) that reduce the energy value of each gallon. Thus, demand is inflated by need for more gasoline to do the same work, which is an imposed requirement, and gasoline is required to be manufactured in a dozen different ways that require a dozen distinctly different configurations of refinery equipment. Whenever you reduce standardization, you increase price and this reduction in standardization is wholly invented by bureaucratic whim.
The long and the short of it is that it lies within our power to have a fairly significant effect on the price of gasoline, the pessimism of the ignorant notwithstanding.
The pricing of video games of differing "qualities" is like the pricing of Coke vs Tab. That's not the point, and has nothing to do with "Supply and Demand" anyway. It is all about how "shiny" something is.
However, note how the unlimited availability of a game like ME3 does not sway it's customers' level of demand for it. People buying it on Origin aren't thinking to themselves "you know, there are billions of copies of this game available, and not just a million hard-copies like there would have been 10 years ago...I don't think it's worth $60 anymore..."
How has Supply affected the price? Only waning future demand gets the prices lowered over time.
If there were "substitute products" for gasoline more widely available, then I could see oil demand being more readily affected by supply. More widespread public transit services, an integrated electric car economy, a rail freight system that wasn't a joke; something that gave people the real option to say, "you know what? I'm sick of paying $4 a gallon for gas, I know they've just obtained a huge surplus, I'm going to use this other thing until the price goes down!"
That doesn't exist. It also doesn't help that unlike most other products in the world, OPEC engages in what amounts to price fixing. It sets what it's members will sell their oil for, generally based on what countries are offering to pay. Even if a US company were to begin producing oil in vast enough quantities to satisfy all of the US domestic demand, I can't see why they'd opt to sell it for significantly less than what OPEC was. It wouldn't make good business sense.
Even if you had several domestic oil producers, the price would be unlikely to drop much, since no single one of them would be likely to satisfy the entire nation's demand. If one of the companies undercut the others significantly, all the others would have to do is take the small hit and wait for the low seller to run out of product until buyers were forced to turn to the more expensive producers again anyway. In order to see a truly significant price drop in domestic oil prices, you would need to see those local producers engage in price fixing of their own, which is illegal in the US. That or a state-run oil producer.
The pricing of intellectual property is a bad example if you want to talk about supply and demand economics. If you want Mass Effect 3, you have to pay Bioware's price. You can't buy it from Bethesda. You can't buy it from Activision. You can't buy it from Square-Enix.
Want a pair of jeans? You don't have to buy Levi's. You can get a perfectly good pair from any of a number of other companies, plus "generics". Want milk? Same deal. You don't have to buy Cumberland Farm's Milk. The stuff in the Walmart bottle is pretty much just as good. Want to buy gasoline? It doesn't really matter that much whether you fill up at BP, Exxon, Mobile, or Texaco. Your car will still run.
But you can't say, "I want to buy Mass Effect 3, but I can't afford it, so I'm going to buy Alien Shooter 3 for $5 and then I can continue the adventures of my character, Alicia Shepard!"
This is sort of avoiding the key point that the law of supply and demand STILL APPLIES to the product we ARE discussing, OIL. Just because Steam can crank off infinite copies of its intellectual property doesn't mean that petroleum is suddenly an infinite resource. The law of Supply and Demand is still in effect.
As to Supply and Demand for intangibles such as games... first there is the fact that the supply of copies is not infinite due to, first off, copyright. (which is the point of copyright, essentially: to prevent the value of one's intellectual property from dropping towards zero as copies propagate by controlling the right to make copies.) But let us pretend that copyright, even as an understood inherent right ( the right to say "I made this, this is my work") does not exist, and that once anything is created, infinite copies of it exist (even if only in potential.)
Even if there are infinite copies of "Captain Blammo," it is still only one game. It has limited content and play time. If you want more exciting adventures with Captain Blammo, you're going to have to go back to the source-- the game's creators-- and cough up more money for them to make more content. You could have a warehouse full of Captain Blammo CDs but you can still only play the game ONCE before you've consumed all the content.
However, Exxon, BP, Texaco, et al, basically all pay the same price for their oil(which is why their price just varies by a couple pennies); a price that is all but set by OPEC. They control a little over 1/3 of world production, far more than any other single entity. OPEC has the raw supply that allows them to effectively set the world price based upon how high buyers are willing to bid.
Sure, Russia(the next highest producer at about 10%) could underbid OPEC, but to what end? They'd only end up satisfying a tiny part of the world's overall demand. Anyone not lucky enough to get Russia's "buddy discount" will end up paying OPEC's price. OPEC certainly won't lower their price, since they know Russia can't possibly saturate the market. The rest of the world will still have to try and outbid each other.
Heck, lets say that US based companies set up enough wells to meet, and even exceed US domestic consumption. Still wouldn't drive down the price. Why? Global economy. Buyers from outside the US will make offers on our oil, driving the price up to about OPEC's level anyway.
In order to affect worldwide oil prices, global production will need to pass global consumption. Really unlikely to happen.
Yes, gasoline is a need. Getting to work, no decent mass transport, etc. But after a certain point, it also becomes a luxury.
Yes, you need gasoline to go to work. But maybe you were planning on driving cross-country to visit relatives. Maybe with the current prices, that's not going to happen now. Poof! Less demand. Maybe you won't go to the cabin this weekend, after all, because gas prices are so high. Wow, another reduction in demand.
Gasoline, and by extension oil, is not a universal need. After a certain point it's a luxury, and supply vs demand really kicks in at that point.
"If there were 'substitute products' for gasoline more widely available, then I could see oil demand being more readily affected by supply. More widespread public transit services, an integrated electric car economy, a rail freight system that wasn't a joke; something that gave people the real option to say, 'you know what? I'm sick of paying $4 a gallon for gas, I know they've just obtained a huge surplus, I'm going to use this other thing until the price goes down!'"
Yes, if we could wave a magic wand and make real alternatives to gasoline use appear out of thin air, gasoline would have increased price elasticity. But experience shows that widespread public transit only has a major effect on car use when it's both highly integrated and car density is such that it makes driving unacceptably costly in terms of time. If you build New York City's subway system in Portland, OR it wouldn't have nearly the same effect. The rail freight system is, in fact, quite effective but the nature of the American landscape necessitates it being used in the way that oceanic shipping is: moving massive amounts of goods from major hub to major hub for smaller and more agile forms of transit (18-wheelers) to distribute. If America was a vastly denser country, this might be different but it's not. And there is little to no chance of creating an electric car economy anytime in the remotely foreseeable future; the demand isn't there, the practical capacity for creating such infrastructure isn't there, and much more importantly the technology isn't there.
"It also doesn't help that unlike most other products in the world, OPEC engages in what amounts to price fixing. It sets what it's members will sell their oil for, generally based on what countries are offering to pay. Even if a US company were to begin producing oil in vast enough quantities to satisfy all of the US domestic demand, I can't see why they'd opt to sell it for significantly less than what OPEC was. It wouldn't make good business sense."
This is true, but there is still a substantial effect from factors outside their control. Oil is pegged to the US dollar and as the dollar weakens, oil becomes more expensive. The futures markets contribute to some of the price fluctuation and these markets operate in the same psychological way that stock markets do. Finally, there are major artificial obstacles imposed by wrongheaded and often malicious governmental interference.
"In order to see a truly significant price drop in domestic oil prices, you would need to see those local producers engage in price fixing of their own, which is illegal in the US."
Not at all. You'd just need to let those oil producers produce to their full capabilities. The confluence of the vast array of sources at our disposal plus augmenting technologies like catalytic conversion of carbon-based wastes and the gassification of American coal reserves (which constitute the largest deposits in the world) plus taking a chainsaw to unnecessary regulation, would cause a severe downward spike in prices before the market corrects... and that'd be years before anything came of it. Modern markets respond partly psychologically to changes in the world and the serious prospect of America pulling its thumbs out of its ass and producing as if it has the resources it does would have a major psychological impact.
OK, regardless of the relative price of oil, let's say that we do need to drill. As a matter of fact I agree with that position. The question then becomes, why aren't we doing it?
"7,000 approved *onshore* drilling permits have been sitting unused by companies that own them, and ...millions of acres under lease in the gulf remain unexplored."
The onshore drilling permits have already been issued. There is nothing governmental prohibiting the development of these potential sources --as far as I know. Yeah, there is some environmental opposition to some of it, but these are now uncontested sites. So, what gives?
It isn't as though the industry is starved for developmental monies. BP, Chevron, ConocoPhillips, ExxonMobil and Shell combined made a total profit of nearly one trilliondollars over the past decade. Last year alone, Exxon/Mobil alone made a profit of 41 bllion.
You'll note it's never actually said that the permits are for areas where the oil IS. Refer again to the list of the major oil finds given. And considering how many teenie-weenie back-acre one-pump sites there are, 7,000 permits isn't all that many. Many are probably for sites that would barely even be a return on investment.
And Congress isn't the only obstacle to drilling. Low yield, or haggling local regulations, or NIMBY lobbyists, just for a start.
Maybe you didn't notice but it wasn't CONGRESS that found the oil under ANWR. Exploration for new oil costs billions, whether you drill or not. Yet every time the oil companies find a new spot to drill, the President puts a moratorium on that site, or Congress does. They can either flush money down the commode trying to find more sites, or you can fight to access what you already spent blood and treasure finding in the first place.
There's an interesting legal development related to the NIMBY types, by the by. A major oil company (I believe it may have been Shell Oil) has filed a series of lawsuits seeking to bar environmentalists and the government from legally harassing them and interfering with their development of their oil finds. If it works out, three cheers for them!
rhjunior
Law of Supply and Demand: we drill, supply goes up, price goes down.
And if we want energy independence nearly as bad as we CLAIM, we have to drill HERE, and we have to drill NOW, and we have to drill ANYWHERE we have a supply.
The price doesn't go down when SUPPLY goes UP, but when DEMAND goes DOWN. Things like fuel have a consistently high demand. An influx of supply is unlikely to do much to alter the level of demand, and thus not greatly affect the price of fuel.
It would still be nice to lessen our dependence on foreign sources though.
Let's say that a company opens up a bunch of new oil wells in the US. Let us also say that the current OPEC price for oil at that time is $90 a barrel.
In such an instance, what is the US company's incentive to charge only $60 per barrel? Why would they give up $30 a barrel in profits? People are already paying $90, and demand has not waned with that price. Deciding to sell their oil for less is just plain stupid. At most, you might see a slight drop in price, but it would be related to the lower cost of shipping oil from a local source, rather than from across the Atlantic.
Is there then some reason that suddenly having this influx of gas would cause people to want it less? Are people going to drive less often now that there is more oil available? Are New Englanders going to decide that it's the time to convert to wood stoves now that heating oil is so plentiful? Will people really decide that since there is more oil available that they will buy less of it, because it's no longer as rare and valuable?
No. The demand for gas and heating oil will remain high. And it would be fiscally irresponsible for any US drilling company to spontaneously decide that they will charge substantially less than the current "going rate".
After all, there wasn't any shortage of department store merchandise before Walmart came along. How do you think they got so big?
Remember also, oil prices are basically set in what amounts to a bidding war. What company is going to sell oil for $60 a barrel when the buyer is saying up front that they will go as high as $90 in order to outbid other buyers?
In order to see significantly reduced oil prices, world oil production has to outpace world oil consumption. Taking into account that hundreds of millions of people are going to be entering the "1st world" market in a couple decades, I don't see that happening any time soon no matter how many sites we drill here.
Steam and Origin.
With these services there is literally an infinite supply of copies of computer games available. Millions, Billions, as many copies of any game as you want!
does this infinite supply change the fact that those games are still $60 a piece at release?
Nope.
Infinite supply. Same price.
The ONLY factor that causes that price to drop over time is demand. When people stop buying a game, the price is lowered in an effort to sell it to people who don't mind spending $20 on a game they find sort of okay. The number of copies available has nothing to do with it.
Your economics courses are grossly out of date.
Note: this is opinion only--I have not researched it. I would be open to being corrected if I'm wrong.
Otherwise, what is your explanation for how an infinite supply has not affected a product's price? Or even its demand?
This is the twenty-first century, and much has changed that seems to fly in the face of tradition economic systems. After all, if you had approached you teachers in that economics course 11 years ago and told them that you were going to start a company that would provide products and services to your clients at absolutely no charge, and that this company would be worth billions of dollars, what would they have said?
Besides which, the initial point of discussion was oil, which has a very much finite supply which fluctuates depending on numerous factors.
Also, it's incorrect to claim that Steam is completely free. The program itself is free to the end consumer, yes, but Valve does get a cut from every sale made in their store, much like Xbox Live Arcade or PlayStation Network. They're actually making quite a bit of money off their clients, when you stop to consider that the publishers are as much their clients as the consumers are.
Cite to me how having more gasoline available will make people want to buy it less.
And the billion dollar companies that give stuff away that I was referring to were Google, Youtube, Facebook, Yahoo, and a plethora of other such companies that we use daily at no cost to us, and yet are worth billions.
Supply is still limited, just not in the typically obvious or direct ways.
If you remember your economics, incidentally, fuel products are in a situation of being vastly less sensitive to price than the majority of other products. People will still buy 16 gallons of gasoline at the pump for a long time after the price has become crippling because it, like foodstuffs, is a necessity. That aside, oil and gasoline prices respond very well to increases in supply or other peripheral developments because they are commodities that are partly priced according to the same psychology that governs the stock market. A perceived supply disruption will push the price higher; a perceived supply increase will push it down. If the commodities markets were in their present form at the time of the Trans-Alaska Pipeline construction, announcement of the project would have caused a price decline and completion would have caused a very sharp dip as the completion of TAP represented a gargantuan influx of oil into the world markets; previous to its completion, the oil-rich North Slope might as well have been on the moon in terms of being able to move the oil. Official approval of the Keystone XL extension would have arrested oil price increases because it would have been interpreted as Canadian tar sand oil becoming more readily available, thus representing a supply increase.
Another major factor in oil and gasoline prices, however, is that the government sticks its nose in. Three or four different forms of oil-based fuel represent the entirety of what we pipe into engines to make them go, yet the government has artificially extended this to more than a dozen by arbitrary "blend" requirements and pushing for ineffectual additives (ethanol) that reduce the energy value of each gallon. Thus, demand is inflated by need for more gasoline to do the same work, which is an imposed requirement, and gasoline is required to be manufactured in a dozen different ways that require a dozen distinctly different configurations of refinery equipment. Whenever you reduce standardization, you increase price and this reduction in standardization is wholly invented by bureaucratic whim.
The long and the short of it is that it lies within our power to have a fairly significant effect on the price of gasoline, the pessimism of the ignorant notwithstanding.
However, note how the unlimited availability of a game like ME3 does not sway it's customers' level of demand for it. People buying it on Origin aren't thinking to themselves "you know, there are billions of copies of this game available, and not just a million hard-copies like there would have been 10 years ago...I don't think it's worth $60 anymore..."
How has Supply affected the price? Only waning future demand gets the prices lowered over time.
If there were "substitute products" for gasoline more widely available, then I could see oil demand being more readily affected by supply. More widespread public transit services, an integrated electric car economy, a rail freight system that wasn't a joke; something that gave people the real option to say, "you know what? I'm sick of paying $4 a gallon for gas, I know they've just obtained a huge surplus, I'm going to use this other thing until the price goes down!"
That doesn't exist. It also doesn't help that unlike most other products in the world, OPEC engages in what amounts to price fixing. It sets what it's members will sell their oil for, generally based on what countries are offering to pay. Even if a US company were to begin producing oil in vast enough quantities to satisfy all of the US domestic demand, I can't see why they'd opt to sell it for significantly less than what OPEC was. It wouldn't make good business sense.
Even if you had several domestic oil producers, the price would be unlikely to drop much, since no single one of them would be likely to satisfy the entire nation's demand. If one of the companies undercut the others significantly, all the others would have to do is take the small hit and wait for the low seller to run out of product until buyers were forced to turn to the more expensive producers again anyway. In order to see a truly significant price drop in domestic oil prices, you would need to see those local producers engage in price fixing of their own, which is illegal in the US. That or a state-run oil producer.
Want a pair of jeans? You don't have to buy Levi's. You can get a perfectly good pair from any of a number of other companies, plus "generics". Want milk? Same deal. You don't have to buy Cumberland Farm's Milk. The stuff in the Walmart bottle is pretty much just as good. Want to buy gasoline? It doesn't really matter that much whether you fill up at BP, Exxon, Mobile, or Texaco. Your car will still run.
But you can't say, "I want to buy Mass Effect 3, but I can't afford it, so I'm going to buy Alien Shooter 3 for $5 and then I can continue the adventures of my character, Alicia Shepard!"
Just because Steam can crank off infinite copies of its intellectual property doesn't mean that petroleum is suddenly an infinite resource. The law of Supply and Demand is still in effect.
As to Supply and Demand for intangibles such as games... first there is the fact that the supply of copies is not infinite due to, first off, copyright. (which is the point of copyright, essentially: to prevent the value of one's intellectual property from dropping towards zero as copies propagate by controlling the right to make copies.)
But let us pretend that copyright, even as an understood inherent right ( the right to say "I made this, this is my work") does not exist, and that once anything is created, infinite copies of it exist (even if only in potential.)
Even if there are infinite copies of "Captain Blammo," it is still only one game. It has limited content and play time. If you want more exciting adventures with Captain Blammo, you're going to have to go back to the source-- the game's creators-- and cough up more money for them to make more content. You could have a warehouse full of Captain Blammo CDs but you can still only play the game ONCE before you've consumed all the content.
Sure, Russia(the next highest producer at about 10%) could underbid OPEC, but to what end? They'd only end up satisfying a tiny part of the world's overall demand. Anyone not lucky enough to get Russia's "buddy discount" will end up paying OPEC's price. OPEC certainly won't lower their price, since they know Russia can't possibly saturate the market. The rest of the world will still have to try and outbid each other.
Heck, lets say that US based companies set up enough wells to meet, and even exceed US domestic consumption. Still wouldn't drive down the price. Why? Global economy. Buyers from outside the US will make offers on our oil, driving the price up to about OPEC's level anyway.
In order to affect worldwide oil prices, global production will need to pass global consumption. Really unlikely to happen.
Yes, gasoline is a need. Getting to work, no decent mass transport, etc. But after a certain point, it also becomes a luxury.
Yes, you need gasoline to go to work. But maybe you were planning on driving cross-country to visit relatives. Maybe with the current prices, that's not going to happen now. Poof! Less demand. Maybe you won't go to the cabin this weekend, after all, because gas prices are so high. Wow, another reduction in demand.
Gasoline, and by extension oil, is not a universal need. After a certain point it's a luxury, and supply vs demand really kicks in at that point.
Yes, if we could wave a magic wand and make real alternatives to gasoline use appear out of thin air, gasoline would have increased price elasticity. But experience shows that widespread public transit only has a major effect on car use when it's both highly integrated and car density is such that it makes driving unacceptably costly in terms of time. If you build New York City's subway system in Portland, OR it wouldn't have nearly the same effect. The rail freight system is, in fact, quite effective but the nature of the American landscape necessitates it being used in the way that oceanic shipping is: moving massive amounts of goods from major hub to major hub for smaller and more agile forms of transit (18-wheelers) to distribute. If America was a vastly denser country, this might be different but it's not. And there is little to no chance of creating an electric car economy anytime in the remotely foreseeable future; the demand isn't there, the practical capacity for creating such infrastructure isn't there, and much more importantly the technology isn't there.
"It also doesn't help that unlike most other products in the world, OPEC engages in what amounts to price fixing. It sets what it's members will sell their oil for, generally based on what countries are offering to pay. Even if a US company were to begin producing oil in vast enough quantities to satisfy all of the US domestic demand, I can't see why they'd opt to sell it for significantly less than what OPEC was. It wouldn't make good business sense."
This is true, but there is still a substantial effect from factors outside their control. Oil is pegged to the US dollar and as the dollar weakens, oil becomes more expensive. The futures markets contribute to some of the price fluctuation and these markets operate in the same psychological way that stock markets do. Finally, there are major artificial obstacles imposed by wrongheaded and often malicious governmental interference.
"In order to see a truly significant price drop in domestic oil prices, you would need to see those local producers engage in price fixing of their own, which is illegal in the US."
Not at all. You'd just need to let those oil producers produce to their full capabilities. The confluence of the vast array of sources at our disposal plus augmenting technologies like catalytic conversion of carbon-based wastes and the gassification of American coal reserves (which constitute the largest deposits in the world) plus taking a chainsaw to unnecessary regulation, would cause a severe downward spike in prices before the market corrects... and that'd be years before anything came of it. Modern markets respond partly psychologically to changes in the world and the serious prospect of America pulling its thumbs out of its ass and producing as if it has the resources it does would have a major psychological impact.
"7,000 approved *onshore* drilling permits have been sitting unused by companies that own them, and ...millions of acres under lease in the gulf remain unexplored."
The onshore drilling permits have already been issued. There is nothing governmental prohibiting the development of these potential sources --as far as I know. Yeah, there is some environmental opposition to some of it, but these are now uncontested sites. So, what gives?
It isn't as though the industry is starved for developmental monies. BP, Chevron, ConocoPhillips, ExxonMobil and Shell combined made a total profit of nearly one trilliondollars over the past decade. Last year alone, Exxon/Mobil alone made a profit of 41 bllion.
Yr explanation, sirrah?
You'll note it's never actually said that the permits are for areas where the oil IS. Refer again to the list of the major oil finds given. And considering how many teenie-weenie back-acre one-pump sites there are, 7,000 permits isn't all that many. Many are probably for sites that would barely even be a return on investment.
And Congress isn't the only obstacle to drilling. Low yield, or haggling local regulations, or NIMBY lobbyists, just for a start.
Maybe you didn't notice but it wasn't CONGRESS that found the oil under ANWR. Exploration for new oil costs billions, whether you drill or not. Yet every time the oil companies find a new spot to drill, the President puts a moratorium on that site, or Congress does. They can either flush money down the commode trying to find more sites, or you can fight to access what you already spent blood and treasure finding in the first place.