Things with the oil industry seem to make much more sense when we look at the true supply and demand which shapes oil prices. It is the dollar not the oil. Mid East and other countries own their national resources and sell these to our oil companies. The prices at which it is sold is based on the countries revenue requirements  and not just simple supply and demand of oil. In order for these countries to maintain their economies, they need a certain inflow of  dollars to maintain their standard of living. and as the dollars buying power deminished the demand for dollars increased, thus raising the price.  Since we have not nationalized our resources and continue to let them be a giveaway to oil companies, the oil companies always want more domestic production. This is because the oil sold from domestic oil is more profitable.  The Saudi Prince recently told Bush that they would not  increase production because it was not demanded by their customers. Assuming Demand stays constant, lets make a few determinations. First is that The US doesn't set oil prices, OPEC does. Domestic production doesn't drive down prices, The domestically produced oil is simply sold to customers at the same OPEC price. So if we increase domestic production and demand doesn't increase, It will lower the supply needed from the Mid East, and thus increase prices, since the revenue requirement will be spread out over fewer barrels, thus increasing the price per barrel. However if we reduce domestic production we can increase the demand on the Mid East , and lower the price by letting the revenue be spread out over a larger number of barrels. Why don't the oil executives tell us this? Shareholder Loyalty and Greed.