JDH isn't thinking bubble in the way you are, Steve. He's noticeably skeptical of the Saudis as well.

Where did I say anything about the Saudi's at all? And I've read Hamilton's articles on this and agree with them largely across to board. Thus, to say he and I have rather different ideas suggests you need to return to mind reading school.

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You've already answered you question. Since the oil companies built up lots of capacity only to have the rug yanked out from under them, they are now playing a waiting game to see if this recent run up in prices is going to last or if it is a bubble that is going to pop. It isn't that hard to understand really.

I'm thinking bubble here, as is James Hamilton.

This time, there is very strong evidence that they cannot just decide to pump more oil.

No sale. Is this the same strong evidence that told us we'd run out of oil over 100 years ago?

Bithead, OPEC charges what the market will bear. In the past, they "lowered their prices" by deciding to pump a lot more oil.

Listen to this very carefully:

This lowered the price for everyone. This is what fungibility means.

Of course! Listen to ME carefully and asnwer the question you've already ignored....
When have I ever said otherwise?

And in any event, why would I consider prices for everyone else remaing higher, a good thing?

And the market will bear quite a bit just now, because the competition has left the field for 'environmental' and 'NIMBY" reasons. I'm telling you that the same thing will happen just now.

Is that why you are always making up your own?

You have specifics? (... he asked knowing otherwise)

Listen to this very carefully:

This lowered the price for everyone. This is what fungibility means.

Now, why won't it work now?

Listen to this very carefully:

This time, there is very strong evidence that they cannot just decide to pump more oil.

Get it?

Is that why you are always making up your own?

But this cycle even without price controls or windfall profits taxes the major oil companies are hardly expanding their exploration and drilling budgets

Then again, they're not being ALLOWED to.

Since governments have control over where drilling can take place it again seems to a case of artificial supply constraints by not allowing the market to work. There is also money being spent by oil companies on alternatives to traditional energy sources.

Correct, and exactly my point.

We are paying now for poor decisions made many years ago

Perhaps more correctly, we're paying the high price of governmental involvement.

The high cost entry into the oil business means we cannot see quick advances by outside companies to take advantage of good returns on investment. These things move slowly but they will move. We are paying now for poor decisions made many years ago.

We would only lower worldwide prices a tiny amount - we'd be sacrificing our future profits for a small amount of benefit shared across the entire world.

Actually, that's not been the history of the thing. One need only look as far back as Prudhoe Bay... when we decided to put that online, OPEC lowered it's prices by rather a lot, in an attempt to keep Alaskan oil in the ground.

What makes you think this time wouldd be any different?

We can't lower our own prices by $10 and everybody else's by $0

Well, that's why I've been confused about your constant harping on this. At what point have I EVER said that the price drops wouldn't be world wide?

The world is pumping as much now as it probably ever will

We've been hearing this chant for 100 years. YOu'll forgive me if I don't take it at face value.

Now explain to us how adding to that world market with the respurces WE can control doesn't work to our own advantage.

We would only lower worldwide prices a tiny amount - we'd be sacrificing our future profits for a small amount of benefit shared across the entire world.

You still, clearly, don't understand what fungible _means_ in this case. We can't lower our own prices by $10 and everybody else's by $0; it'll end up being $1 lower for the whole world - at which point we need to have an honest discussion about whether the $1 (for us) is worth it.

And, folks, OPEC isn't why prices are high now _either_. The world is pumping as much now as it probably ever will - and the markets are finally catching up as they learn not to trust the lying Saudis.

But it is not happening that way this time. In the 1970s the oil companies spent every penny they could get on new exploration and drilling. By the time the 1982 recession hit demand that new capacity was coming on line and for a decade we had a surplus of oil driving prices down and they stayed down for nearly another decade. Moreover, this happened despite price regulations and the windfall profits tax.

But this cycle even without price controls or windfall profits taxes the major oil companies are hardly expanding their exploration and drilling budgets.Drilling activity is half of the peaks its reached in the 1970s and even less of what a regression of real oil prices against drilling implies it should be. Rather the major oil companies are returning an unusually large share of their record profits to their shareholders with the message to find a better use for the capital then oil drilling and exploration.

So in essence your story of the economics of high oil prices and the way the system works is only telling half of the story. Why don't you tell the rest of the story?

If demand were the issue, prices would already be down. World demand has been off for months, now.

Demand is still a factor, if it weren't the "bubble" you keep advocating would never burst, which you keep advocating it will.

Michael, I've already provdied you the disaster list, remember?

I was actually requesting them from M1EK (more for the subsidy numbers), since he is the one that made the claim I was responding to, though I don't believe either of you have posted actual numbers yet, not in this thread at least.