The size of the oil supply depends on the price (and visa-versa)
Oil costs what it takes to get it out of the ground, and the cost to where it's going. For gasoline or deisel or whatever, add on the cost to refine it into the desired petroleum product.
Since oil can be shipped, oil is a global market. Just because Saudi Arabia can pump oil very inexpensively doesn't mean they will sell it for any less than oil pumped from a mile beneath the sea at great expense. Oil is oil.
So when the price of oil goes up the cheap producers make more profit. Meanwhile, other producers have an incentive to go after oil that it's expensive to get out of the ground.
At $20/barrel there is very little oil in the world. Saudi Arabia has some.
At $100/barrel there's a fair amount of oil. Pretty much what we see today.
At $500/barrel there is a tremendous amount of oil... huge amounts. At $500/barrel the USA could easily be energy self-sufficient. Employment in Louisiana and Texas is sensitive to the international price of oil. At one price it is too expensive to get oil fom the Gulf of Mexico. At another rpice it is worth the cost, and domestic production picks up.
Newt Gingrich thinks that if we drill for more oil in the US that gas will be under $2.50/gallon. Two ginormous problems with that.
1) Either we would have to nationalize the oil industry (otherwise oil will cost what oil costs in the global marketplace and oil companies will export our oil to places where gas is a lot more than $2.50), or the US would have to produce enough oil to collapse the global oil market. So we would have to pump enough to satisfy 25%-35% the entire world's oil needs and sell it below market!
2) If there was trillions of barrels of oil in America that could be pumped for much less than average we would fucking know about it... it would already be being pumped. There is a LOT of oil under America and when oil goes to $250, $350, $450 a barrel it will become economically viable to get at it... because gas will cost $10/gallon. But there is no freaking way we have vast reserves pumpable at a cost that works out to less than $2.50/gallon.
Say we discovered a brazilion gazillion barrels of oil on Mars. What would the effect be on the price of oil? None whatsoever. The market price of oil is far below the cost of getting oil from Mars so it's irrelevant. If, however, oil somehow hit a billion dollars per barrel then people would start thinking about the oil on Mars because it would be economically feasible to get it.
The amount of oil extant is irrelevant without specifying a cost. The world's supply of oil is all the oil that is economically worth getting at today's oil price. Change the price and the "available" supply changes.
Hey, he's a historian... not an economist.
= new reply since forum marked as read
Independence forever from Saudi kings, or some such fluffery. 
Nonsense, the BP oil spill was based on the fact somebody thought it would be AWESOME to be drilling that deep beneath the ocean's surface, like a cool skateboard trick. The could have drilled another traditional well in Texas, but how much less awesome would that have been?
You're right on all of this, I just wonder what the hell people are thinking to not see it.
As far as the prices go, what I want to see is a good chart mapping stock market growth with a delayed oil price surge. It seems whenever the economy goes up, oil goes up, and eventually tanks the economy. Oddly, if what they say is true about Obama losing popularity based on gas prices is true, the recent increases in the stock market could be bad news for the incumbent.
