This requires production increases of about 1.8% per year, or increasing to about 87mbpd from current production (using CIA estimates). Not totally unreasonable (although it may be far more difficult than we think, see below), but that would require growth equivilant to about 2/3 of that which occured during the beginning of the great price rise back in 2002-2005. Essentially it took a massive price increase to be able to accomplish this so further growth ought to be based on further price growth.

Unless of course all this is priced in. We sit at $76 for oil as I write this, last time we were there price wise was 2007 when production was slightly lower than it is now so I don't think it is priced in.

If it took a price rise of roughly 100% per year (from 20 to 60 in 3 years) to achieve 3% growth 1.8% will come with price rises of about 60%. Obviously this is not a very accurate estimate, the operating climate is different now from back in 02, nevertheless this suggests price growth.

This all assumes that oil production is as easy to increase now as it was then. Unfortunatly it may not be.

This was, as you would expect, it was matched with an increase in drilling rigs

The strange part about this is that after about 2005, despite large increases in rigs (we peaked at over 3,500 in 2008) production has remained relativly flat

(production was 85.43 in 2009, down about 0.4 from 2008)

So what does this tell us? Likely that most of the fields being brought on line after 2005 were tiny and as such did not contribute much to production. I am not professing to be an expert on this, I cannot say that this was not a fluke for some reason, but it appears that significantly increasing production past about 85mbpd is exceptionally expensive and hard to do, meaning that when demand is over this, we may see some supply contstraints until a far higher price is achieved.

There is no garuntee that we won't double dip, or that we won't find a new, cheap alternative energy source but until this happens I am looking for significant price increases.

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