sf -- OTOneH, you're right. OTOtherH, we can argue all we want but the companies will still use 10% or 15% DR. And as far as future price expectations don't expect much relief there. Last year when oil was bouncing around $130/bbl+ most companies were still using $70-80/bbl future prices. And many companies were actually using lower prices (by 10% or so) for Years 2 and 3 with rather modest increasing expectations for the remaining years. Turns out even at that they were a tad optimistic, weren't they? Trust me: no one but an utter idiot in the oil patch expected those prices to hold any length of time. And don't imagine there are many CEO's pounding the board room tables demanding that such optimistic price expectations as you suggest be used in the current decision making process. And that's not to argue Simmons is wrong. But future pricing optimism has always been viewed in the oil patch as the crutch of a poor manager.
We tend to leave such arm-waving theatrics to the stock brokers. Also, consider this: I deal with companies that drill in Federal waters and they are starting to discount those numbers even harder. They're anticipating, as deficets rise, the gov't will be getting greedier when it comes to revenue sharing and are thus scaling back expectations (and budgets) accordingly.

But I think you get my original point: the prevalent decision making process will be of little value dealing with our long term energy needs. The “free market” Wall Street view controls the process whether it serves the country’s long term needs or not. Really no different then how the gov’t policy of pushing sub prime home loans helped the economic short term and has now crippled us long term.

The discount rate used in a project evaluation does not have a direct connection to the fed interest rate. It's actually referred to as an IRR (internal rate of return) and has more to do with what the company regards as an acceptable number. As ROCKMAN says, it's been 15-20% for some time. Up until very recently any company could waltz out, find a hedge fund, and do that well.

Pick a lower number, and more long-term investments become possible. The problem is that everybody gotten used to gigantic ROIs and doesn't want to go back.