As far as supply is concerned, yes, I'm more optimistic than you are. I strongly suspect that the Santos basin and the recent Gulf discovery are the minimal tip of a very large iceberg. It is only in the last few years that there has been any incentive to look for "deep oil", the process is very complex and very time consuming, and only a very small number of areas with potential have seen systematic exploration. I think there's a whole lot more out there. We've only just begun to look.

I also think there will be a whole raft of new technologies emerging for getting more oil out of existing deposits. Right now the rule of thumb is that only 20-30% of a given deposit is recoverable, and I think that's going to change. Again, there was little incentive to develop those technologies in the face of a glut and perceived glut that persisted up until a very few years ago, but if the price of oil stays high, that changes the incentives radically. You put a few hundred billion dollars underground, there's going to be some real effort put into getting it out.

The development costs will be very high, but as long as oil stays in the $70-120 band the numbers still work out.

Again, the problems - and there are very large ones - lie more on the political and financial factors. The technology for finding and extracting new reserves is in the hands of the oil companies. The new exploration is very expensive and the oil companies will not invest without assurances of return on investment. Many countries with potential reserves are reluctant to make deals with oil companies.

In some areas we are seeing these problems addressed: the GCC countries in particular have led the way in developing win-win relationships between national oil companies and oil majors. Of course some level of political stability is essential. Some countries that have been driven by nationalist impulses in the past (think Mexico, Indonesia, and eventually Venezuela) will be forced by financial necessity to take a more pragmatic approach. It is in the interests of Western governments to promote such deals, but unfortunately "big oil" stands only slightly behind "wall street" in the demonology of anti-corporate sentiment, and in many places official support for oil companies is seen as politically unacceptable, even when the national interest coincides with the private interest.

Again, the danger of the excessive focus on absolute supply is that it distracts from desperately needed efforts to resolve the political and investment constraints on further exploration and production.