Ideally, when demand goes up, production facilities should start to become attractive investments.

In practice, it's a bit more complicated. Especially when dealing with mutating and semi-arbitrary regulatory environments.

Add to that the state gasoline formula regulations, and other issues, and you have a situation where long-term planning becomes almost impossible. At any moment, the government could decide that gas should contain less sulfur, or more ethanol, or be a certain color for every state in the union, or smell like cherry blossoms. To a politician, most of which know less about technology than my dog, to pass a law is to make something possible.

Large industries have to deal with planning many years in advance. There are enough shifting sands underneath them with market forces alone, without the added whims of political interests.

If you have a plausible alternative to the free market approach, by all means enlighten us. The abysmal record of centralized economies in distributing resources effectively is there for everyone to see. Those who say the free market "doesn't work" have typically never actually thought about what kind of system would work.

I realize that many people are convinced that the only reason there isn't plentiful oil, solar cells on every housetop, and cars that get 500 miles to the gallon is evil corporate greed. I can't disabuse anyone of that notion. I also can't disabuse anyone of the notion that if only the Right People had power over everything, the world would be a paradise. The market system is a current flowing past most shoals and rocks naturally. The urge to grab the tiller and Do Something is very human. People can deal mentally with controlled environments, like cornfields. They have trouble with chaotic yet stable systems, like rain forests. The urge to impress order on something is one reason conspiracy theories are so attractive to people. Better that evil is at the controls of the world, than to deal with the unpleasant idea that things just happen and systems adapt on their own.

If oil is getting harder to come by, and current inventories aren't going to make the impression on the industry that long-range projections are, prices are going to stay up, and then alternatives will be found. This has been true of almost every dwindling resource in history.

Right now, prices are apparently going down in response to the anticipated higher inventories.