There's a great free article up today on Economist.com explaining how oil prices will not quickly fall despite the recent decision by OPEC to increase production. The publication writes as follows:

Last week, the oil minister from the United Arab Emirates said that OPEC was likely to consider raising the formal production quotas it sets for its members, in response to an oil price that has remained stubbornly above $40 per barrel. At the weekend, other OPEC delegates contradicted him, saying a rise in quotas was unlikely and a cut in production was quite possible before next spring. But at its meeting in Vienna on Wednesday September 15th, OPEC announced that it would raise its quotas by 1m barrels per day (bpd), to 27m bpd, with effect from November 1st. It also decided to meet again sooner than scheduled, agreeing to reconvene in Cairo on December 6th.

If OPEC’s signals are even harder to read than Mr Greenspan’s at the moment, it may be because the cartel finds itself in a position the central banker would dread. When Mr Greenspan sets his target for the federal funds rate, he can be sure it will be met. But when OPEC announces an output quota, it can be quite confident the target will be missed—the cartel is currently exceeding its official limit by as much as 2m bpd. Even worse, OPEC’s oil output is now almost as high as it can go. Raising quotas may thus have no discernible effect on production (emphasis added).

The dilemma is not relegated to production; the Economist explains that prices might not fall even if the production increases called for by OPEC come to fruition.

With supplies stretched this tight, any disruption or disturbance can move the oil price: the insurrectionist sabotage of pipelines in Iraq, the court-ordered sabotage of the Yukos oil company in Russia, or the meteorological sabotage wreaked by Hurricane Ivan in the Mexican Gulf. News of another fall in America’s stocks of crude added almost a dollar to the oil price during trading on Wednesday, leaving OPEC rather upstaged.

The painful fact that the Economist imparts in this article--one that's sadly missing from any of President Bush's speeches--is the fact that production alone cannot abate our energy problems. In fact, the Economist goes further by implying that increases in production--which it fully explains are hard to come to--might not even decrease the cost of oil as a result of the many sources of turmoil in the world (not to mention high demand).

The only relief the magazine sees lies in a declining economy, sadly. If prices ultimately rise too sharply, they write, demand will be curtailed and equilibrium will once again be achieved (the classic lesson learned in Economics 101). They write, "The world economy is already slowing. China’s demand for oil, 6.5m bpd in the second quarter, is forecast to slip to 6.3m in the third, according to the IEA. America’s petrol consumption, seasonally adjusted, fell by about 200,000 barrels a day between April and July."

I'm not certain that this is an ideal situation, and I cannot find respite in the fact that only a slumping economy will drive down oil prices. Though our short term (and perhaps medium term) energy crisis might not be easily solved, it's clear that we must take drastic steps today to become energy independent.

John Kerry has not fully flushed out a plan that can truly diminish our need for foreign oil, but he is much closer to the right track than the President. Strict fuel efficiency standards must be enacted immediately so they can be implemented as soon as possible, and the government must invest heavily in both new technologies and in the building of many more power plants (preferably from clean sources like wind and solar energy). I'm afraid if we don't make these changes soon our economy--and that of the world--will slip into a much deeper rut than the one in which it finds itself today.