is still in the future, according to Daniel Yergin.

There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day — from 85 million barrels per day to 101 million barrels a day — a 20 percent increase.

This is based on what Yergin calls a “field-by-field” analysis. He goes on to say,

The oil industry is governed by a “law of long lead times.” Much of the new capacity that will become available between now and 2010 is under development. Many of the projects that embody this new capacity were approved in the 2001-03 period, based on price expectations much lower than current prices.

For Discussion. If you believe this forecast, what should be the pattern for oil prices, production, and inventories for the next several years?