What did we say? When oil prices rise, oil companies increase exploration and development in order to increase the amount produced (i.e., moving up the supply curve, not an increase in supply)? Tim has used increased new wells as evidence.
If we had also used increased investment spending by oil companies as evidence, and I bet we did but I can't find it, it turns out that evidence is a load of crap. From the WSJ:
The world oil industry has barely increased its investment in oil and natural-gas production during the past five years after accounting for inflation, a new study finds, suggesting global energy prices are likely to encounter upward pressure in the years ahead.
Data compiled by the International Energy Agency show that investment in the oil-and-gas industry was $340 billion in 2005, up 70% from 2000. But cost inflation for goods and services used by the industry accounted for almost all of that increase, according to the IEA, the energy club of 26 of the world's major industrial nations. Adjusted for inflation, the oil industry's investment increased by 5% between 2000 and 2005, the IEA, based in Paris, said.
Inflation, the average price change, hits different industries in different ways. The CPI is the most closely followed measure of inflation. It includes a "market basket" of goods and services that the typical urban consumer might buy. I'm fairly sure oil rigs aren't in the market basket so the tame consumer inflation gave us no indication that oil rig inflation was about 65%.
Maybe the new Congress should open up an investigation into price gouging by the oil rig supply industry.
