"I'm curious, do you think that there are ever limits on the multiplier effect? In a hypothetical world, would improving the fuel efficiency of the fleet of American automobiles and/or reducing the amount of miles traveled by Americans (the latter is what's been driving oil consumption in recent decades) be a positive or negative from an economic standpoint?"

Of course it would. The issue is making the fuel efficiency of the American automobiles palatable for the American consumer. Forcing the American consumer to pay more for something that is less than what they have now would not be acceptable for the average consumer. The market would not be there. Now assuming you can create a fuel efficient vehicle which has much of what is now available (same conveniences, same horse-power, etc), then the market would be there...after all, what consumer would turn down what is essentially the same vehicle they already have with a greater mile per gallon?

As to whether or not I believe the mulitplier effect has limits, I believe that everything in our economy is interrelated. As such, what affects one location of the market, inevitably affects the other parts of the economy.

"I view the reduction in fuel consumption as having a "multiplier effect" in the arena of consumption and overall human happiness. Higher fuel prices promote less driving, more dense (aka energy efficient) housing, more oil to use in areas where it's not easily replacable (plastics production, fertilizer, etc.)."

Ah, here we diverge. I believe you can reduce consumption of oil based products but you cannot reduce driving (or travel, if you will) due to the complexity of our economy...interstate commerce is a large part of the economy and cannot be reduced to the extent you suggest. More dense housing? This is NOT something most people desire because people LIKE to have living room...very FEW people want to live in crowded conditions. Ask people in large cities if they would rather live in a house with acreage or in an appartment and most would rather live in the house. More oil is possible as we already have available assets...we simply need the government ot release those assets, as I said earlier.

redheadforhire,

"Oil production peaked in the 1970's, as was accurately predicted by M. King Hubbert in the 1950's. So as the available resources go down, it makes very little sense to invest the 100's of millions required to build new processing facilities, when there is continually the crude that needs to be processed."

As you state you have "worked in the oil industry for over a decade", I would like to ask why some of the capped oil wells are being uncapped now. Further, according to the US Department of Energy, a great deal more lies underground and the project Deep Trek is exploring technology to allow economic drilling to the depths required.

"The US's need for processing facilities peaked, and has declined, and eventually there will be processing facilities that are completely dormant because they are essentially unemployed."

So you are saying there is NO oil awaiting refining...that it is sent directly to the refineries for processing as soon as it arrives in the US? In point of fact, utilization reached more than 100% during the last half of the 1990s. So my question is, why not build more and increase that number?

"anytime a well is drilled and not exploited, it is only because the cost of recovery is too high compared to the market price. It is a function of small, isolated deposits that have a high discovery and transportation costs. Those wells will be exploited when the cost is below the market price."

Indeed, yet again the DOE is currently exploring ways to economnically salvage these deposits as well as others.

"A gas tax artificially raises the market price, and makes more reserves economically recoverable. Since the US is on the downward side of production, it will not be an increase sufficient to overtake rising demand and lower prices, but it may make the market less volition."

No a tax would not decrease demand and lower prices...it would only retard the economy due to the fact people will do without other things in order to drive their car to work or wherever. A tax will only stunt our economic growth...as most taxes do in the long run.

"I only wish I had the time to address the absolute retardedness of your proposition to open every available area for drilling. It is a very short term approach that would have zero effect."

Of course it's a short term approach...that is what it is MEANT to be. Obviously, it will not last. However, to say it would have zero effect is incorrect. You must agree it would lower our dependence on foreign oil. Further, we could use the short time available to explore alternate means of energy.

"As wonderful as it is to have Anything I Want Overnighted To My Doorstep!, maybe we should give more local consumption a better look."

A logical conclusion...yet people will pay for what they desire...even if it means they will do without something else. It's simple human nature.