Tomas, these high paid so and so's are stealin' my copy! <g> They don't have it quite right yet but that's ok, all they need to do is keep reading SI Drilling, right? They are getting closer though. <VBG>
Point number 1. in this previous post by yours truly, is now strongly supported by the data below.
My post:
Message 11905034
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Supporting Data:
quote.bloomberg.com
Bloomberg Energy
Sat, 27 Nov 1999, 12:46am EST
11/26 14:51 Crude Oil at $30? That's Cheap by 1981 Standards, Energy Department Says
By Mark Pittman
Crude Oil at $30? That's Cheap by 1981 Standards, DOE Says
New York, Nov. 26 (Bloomberg) -- Crude oil prices have more
than doubled this year to $27 a barrel, and they still haven't
weighed on a U.S. economy headed toward record growth.
The price of oil would have to rise to about $65 a barrel
before it would equal its inflation-adjusted peak in 1981, when
the U.S. was headed toward a recession, according to a study by
the Department of Energy.
Oil accounts for a smaller part of the nation's economy --
less than half of what it did in 1981. The U.S. is in its ninth
year of economic expansion as businesses use computers and new
technology to produce more using less fuel.
While oil prices rose recently to $26.87 in New York, after
Saudi Arabia and other exporters cut global output by 7 percent,
``there's no way that you can say that even $30 a barrel today is
to the point that it was' in 1981, said Dave Costello, the DOE
economist in charge of the agency's Short-Term Energy Outlook.
To be sure, higher oil prices can boost the cost of other
goods and spur inflation. But the government study shows prices
would have to rise much further to slow growth the way they did
in the early 1980s, when Iran cut off oil supplies to the U.S.,
sending prices -- and inflation -- soaring.
Not Enough
``By itself, the price of crude oil is not' going to spur
inflation at current prices, said Irene King, chief oil economist
at J.P. Morgan & Co.
According to the Energy Department study, which converted
oil prices from earlier years into 1999 dollars, the average cost
of oil imported by U.S. refiners peaked at $64.69 in 1981. The
price is adjusted to reflect increases in the gross domestic
product as a measure of inflation.
The estimate would be $2 higher, at almost $67, if the
government used West Texas Intermediate crude oil instead of an
imported grade in its study. The Texas oil is traded on the New
York Mercantile Exchange and is the benchmark for U.S. prices.
High oil and gasoline prices are less likely to rouse
inflation than in years past, analysts said. This year, they are
only about 1.4 percent of the U.S. gross domestic product, less
than half what they were in 1981.
While prices are a long way from $67 a barrel, that doesn't
mean the cost of energy has a benign influence on growth.
Prices are well above the $5 that a barrel fetched in the
early '70s and the 12-year low of $10.35 reached as recently as
last December. Oil has surged so far and so fast that some
investors are concerned inflation will pick up, a sentiment
that's contributed to a 10 percent drop in the return on
benchmark 30-year U.S. bonds this year.
`Super-Hot'
``If we didn't have the tightest labor market in 35 years,
if it wasn't coming in the middle of a super-hot economy, high
oil prices wouldn't matter,' King said. ``Things being what they
are, it could spill into wages.'
J.P. Morgan expects the Federal Reserve to boost interest
rates again, in part because of higher energy prices, she said.
The Fed has increased the cost of borrowing three times this
year.
The energy-price rally could still slow economic growth and
dampen consumer confidence. One look at the corner filling
station shows why.
The national average pump price of regular gasoline is up 27
percent since late February and at a 3 1/2-year high of $1.269 a
gallon, according to the DOE. Premium grades have fetched more
than $2 a gallon this year in California, so it's no surprise
that consumers take little solace in the knowledge that in
today's dollars gasoline is about half the price it was in 1981.
Some airlines, stung by higher fuel costs, already are
boosting fares. UAL Corp.'s United Airlines, Continental Airlines
Inc., AMR Corp.'s American Airlines and Delta Air Lines Inc.
increased ticket prices 3 percent, though Delta today backed out,
raising doubts about whether the others would stick to increases.
``The effect of higher oil prices starts appearing in other
things,' King said. ``Suddenly, a worker says, `I need a bigger
wage increase,' which can rev-up inflation, she said.
Peak at $30?
Still, crude oil prices aren't expected to go much higher
than they are now. A recent Bloomberg survey showed analysts
expect oil to peak at about $30 within the next six months before
declining as producers ease up on export limits. With oil prices
that high, gasoline at the pump would average more than $1.40 a
gallon, or about 10 percent higher than it is now.
While estimates for next year's average price in the
Bloomberg survey ranged from $18 to $30.25 a barrel, most
analysts expect the Organization of Petroleum Exporting Countries
to boost output during 2000. Limits on supply sent prices to
$27.07 a barrel this week in New York, the highest level since
January 1991 during the Persian Gulf War.
Oil probably will fall next year, averaging about $21.60,
because OPEC and other exporters don't want prices to linger too
long at nine-year highs that could slow demand and entice other
producers to pump more, according to the Bloomberg survey.
``Oh yeah, I'm looking for more oil,' said George Yates,
the former chairman of the Independent Petroleum Association of
America and president of the Harvey E. Yates Co. of Roswell, New
Mexico.
Prices won't stay high long because $30 oil is a big
incentive for producers to increase output, Yates said.
``There are lots of opportunities at $30,' he said.
Here are the average per-barrel prices of imported oil in
1999 dollars, as calculated by the U.S. Department of Energy:
1981 $64.69
1982 $54.71
1983 $45.67
1984 $43.34
1985 $39.16
1986 $19.75
1987 $24.81
1988 $19.23
1989 $22.92
1990 $26.43
1991 $21.85
1992 $20.69
1993 $17.88
1994 $16.78
1995 $18.13
1996 $21.41
1997 $19.00
1998 $12.28
1999 $17.35
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