I'd accept the analogy if oil actual netted returns in the same year. As it is, it's gonna take several years just to get the drilling equipment in place. With farming, you can clear the land, plant the crops, harvest the crops and have them at the market in less than a year. So it actually DOES increase the supply. Considering how long the time frame is on this offshore drilling actually having an effect on the marketplace and how little of a drop in the overall supply bucket it's really gonna be, I just think the money could be better spent researching alternatives rather than tying us to the same whipping post.
Well, actually the oil market is more able to meet demand than farming. Farming needs to be planned based on averages. You can only plant certain crops at certain time. Plant to little and not make enough, plant to much and be left with overage that was costly to produce and then discard eating into profits. Factor in weather and crops are much more volatile than oil.
Oil while limited, has a good amount of excess supply at current usage. many OPEC countries and others are not pumping at capacity because simply put, they don't need to. There is not a shortage currently.
The problem was the market was looking forward. Looking at expected growth over the next decade and seeing that if production remained stagnant we would reach a point where excess capacity would be slim.
If we open up more ocean, start drilling the shale in the midwest, tap oil sands in Canada, open part of ANWR, continue to develop coal to oil and help Brazil tap into the newly found oil reserves then the future looks much brighter (or smoggy depending on location).
On top of that, China and India have now stopped subsidizing their gasoline. As a result demand is slowing, still increasing, but slower. We as a nation are consuming less and working towards a future where overall demand is lower.
All of this means that the future of oil looks to be excess supply. Excess supply means lower prices.
Look at the housing market. People started buying and a shortage occurred. Builders jumped in and started building at a frantic pace. Every Tom Joe and Harry handyman started trying to "flip" houses. Prices continued to rise. More projects were planned. Everyone thought the boom would last. now, we have a huuuge excess supply. Projects are still planned to put more supply in the works because it would be more expensive to cancel than to continue. This means more excess supply. Prices will continue to fall.
Eventually the market will balance out. i don't think we will get back to 30 a barrel, but I think 60 is realistic.
Of course, all this goes out the window if anything happens with Iran. But I am thinking and really hoping cooler heads will prevail.
Also, i think given the current climate and that most people think oil will stay above 50 going forward the incentive is still there to develop alternatives. Heating oil and gasoline will still be double what ut was a few years prior. The room for cheaper more efficient technologies to undercut it has increased. With all the current investment I do not think it will be long before we see solar, wind and hybrids/electirc cars all be viable even at the lower price of fuel.
