Thursday, April 24, 2008

Well, It's About Time

The high price of oil has created a boom in domestic oil drilling and production.

We need a lot more of it. Now if we just started drilling in ANWR.
George Stapleton has been in the oil business for 30 years, helping plumb sands and shale across the Middle East, Asia and Europe. Now the chief executive of MegaWest Energy Corp is drilling deep into Missouri farmland.

In a non-descript pasture bordered by a pecan grove and a fish pond, Stapleton's company has hit black gold -- and in doing so is demonstrating how record prices of more than $100 a barrel are fueling a modern-day American wildcat oil era.
In other words, the higher prices and profit motive has generated a boom in oil exploration/drilling/production.
Indeed, as giant oil and gas conglomerates focus on key resource sites in Alaska, off shore and abroad, a new breed of speculator is emerging to dig deep into hard-to-mine areas abandoned when energy prices sank in the late 1980s. New technology has made many formerly abandoned U.S. oil fields easier to access, and recent high prices have made using that high-cost technology profitable.

More than 17,000 new U.S. oil wells were tapped in 2007, the most active pace since 1990, according to the American Petroleum Institute, a leading U.S. trade group.
So the higher prices have made previously costly to access oil now a reasonable source to tap.

The bottom line here is we don't have to build expensive, government grant-funded ethanol plants, we don't have to take millions of tons of grain out of the food supply, and we don't have to try to invent expensive new energy sources. We just have to let the law of supply and demand work in the oil industry, watch the higher price cause some efficiency and drop in demand, plus watch the profit motive generate an increased supply.

I expect to see a significant surplus of supply in the future.

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