"We Can Drill Our Way Out of High Prices."

Don't bet on it. Some people claim that unleashing U.S. oil and gas resources would slash the price of crude. Who can forget the cries of "Drill, Baby, Drill!" that saturated airwaves during the 2008 presidential campaign? Others insist that, because oil is priced on a global market, increased U.S. output wouldn't move the needle. Even Douglas Holtz-Eakin, the top economist for John McCain's 2008 presidential campaign, has written, "Domestic action to increase production will not lower gas prices set on a global market."

The precise truth lies somewhere in between. If U.S. producers were able to massively ramp up output, the ultimate impact would mostly boil down to one big question: How would other big oil producers (mainly the Saudis and the rest of OPEC) respond to a surge in U.S. supplies?

To stop prices from falling, they could cut back their output in response to new U.S. production, much as they've tried to in the past. That's essentially what happens in the much-cited projections by the Energy Information Administration. In one recent exercise, for example, it looked at what would happen to gasoline prices if U.S. oil production grew by about a million barrels a day. The net impact was a mere 4 cents a gallon fall. Why? All but a sliver of the increase in U.S. output was matched by cutbacks in the Middle East, leaving oil prices barely changed.

Predicting OPEC's behavior, though, is notoriously difficult. No one country wants to bear the burden of selling less oil. In good times -- when demand is high and supplies from outside OPEC are weak -- the market is big enough for everyone to have a piece. That's what happened in the early 1970s: Rising demand for crude combined with declining supply in the United States to give OPEC unusual power. The result was a decade of historically high prices.

In leaner times, though, when demand is less robust and supplies from outside OPEC are strong, restraint can be difficult. Left with a smaller market to divide among themselves, OPEC producers can end up battling for market share, ultimately pumping far more crude than expected. This is in part what happened in the 1980s: High prices spurred new supplies and restrained demand, making coordinated OPEC action to prop up prices almost impossible.

Which pattern will we see in the face of rising U.S. supplies, combined with new production from Brazil, Canada, Iraq, and beyond? Given the growing demand for oil in China, India, and elsewhere, the safest bet is on continued high prices, though slightly lower ones than would prevail without the new supplies. As a senior OPEC official told me this year, "There is plenty of room for everyone." Yet new crude -- particularly if it collides with strong restraints on demand -- could change the equation. It would be foolish to rule out a crash.

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