adam smith, you make some interesting points, which have common sense appeal at first, but please allow me to discount them a bit:
RE your points about carmakers and alternative fuels - the issue here is huge startup costs. the carmaker who spends billions in borrowed money to develop alternative fuels risks bankruptcy if things don't work out. and if they do, their competitors will be able to mimic the technological advances at a much, much lower cost. thus, there is little incentive to take such a huge risk.
a more efficient approach would be for the government to partner with the large american automakers and to jointly develop an alternative fuel car. it's a huge project, with very high costs, and with diffuse benefits that are almost impossible for one company to capture.
second, re middle east oil, you make a good point about middle east oil being the cheapest to extract and that consequently, at lower prices middle east oil would still sell fast and oil in other places would not be profitable. but this ignores at least two relevant points: 1) the concern with middle east oil is dependency - if we are buying middle east oil not because we have to but because it is cheaper, then we are not dependent. we can opt for higher priced, but readily available, oil from other sources (and the market can be comfortable knowing that an alternative source for oil exists in case of political strife or an eruption of violence in the middle east).
2) if oil prices drop, there is less money going to the middle east. lower oil profits mean less money for authoritarian regimes to control their people (and to pay off radical clerics to support their regime) and less money to trickle down to terrorists.