The AP reports that Chevron and two smaller oil companies have tapped a new oil field in the Gulf of Mexico that "could become the nation's biggest new domestic source of oil since the discovery of Alaska's North Slope more than a generation ago."
As an economist, this is both promising and troubling. As most models of resource depletion would predict, rising oil prices provide incentives for at least three things: Conservation on the part of consumers, investment in alternative fuel technologies by investors and investment in oil exploration by oil companies.
Higher prices lead to oil exploration in places where it was previously not profitable to explore. The new discovery in the Gulf of Mexico...
...set a variety of records, including the deepest well successfully tested in the Gulf of Mexico. Chevron said it was drilled to a total depth of 28,175 feet in waters that are 7,000 feet deep.
So now what happens? If this discovery pans out--early projections are it could increase domestic production by 50%--the incentive for investment in alternative fuel technologies is diminished, or at least delayed and my SUV investment doesn't look quite as bad.