Ike, Maple Leafs 4, Canadiens 3
At Toronto: Toronto turned two mistakes by Montreal goalie Jeff Hackett into goals and the Maple Leafs hung on to win.
What the hell happened to Patrick Roy?
Re: Oil
You should buy some XOI calls and you'll probably be rewarded.
>ASSOCIATED PRESS
March 5, 2000
NEW YORK -- Like a trickle from a leaky barrel, the effects of rising oil prices spread far beyond the corner gas station.
This past week, shrinking oil supplies drove up the price of crude oil to its highest level in nine years. On Wall Street, shares of oil companies rose substantially, as did the oil services companies that build and maintain drilling rigs.
But while world oil ministers met in London to discuss strategies for ending a global oil shortage, economists were considering whether a long-term rise in prices could be the factor that finally stirs inflation.
The answer: Not yet.
"In order for oil to have a real impact on inflation, it would have to go sharply higher and it would have to stay there for a long time," says Jim Weiss, deputy chief investment officer for stocks at State Street Research and Management in Boston.
Part of Wall Street's sanguine response to the rise in oil prices comes from the fact that oil languished at drastically low prices in 1998 and early 1999, prompting oil exporters to cut back significantly on production levels.
As a result, crude oil has gone from $10.72 a barrel on Dec. 10, 1998, to a nine-year high of $32.15 during trading Thursday on the New York Mercantile Exchange. On Friday, the price slipped back to $31.51 a barrel.
Heating oil prices have doubled in some areas of the northeastern United States this winter, and U.S. gasoline prices have neared an average of $1.50 a gallon, an all-time high.
In San Diego, the average price of a gallon of unleaded regular Friday was $1.592, up from $1.529 a week earlier, according to a survey by the Utility Consumer's Action Network. The price in Los Angeles went from $1.479 to $1.542 a gallon.
"That's the human factor, and it's causing some discomfort," Weiss says, but he adds that concerns are mitigated by the buoyant economy, which has put most Americans to work.
"Incomes are rising and everyone is employed," he says. "There's an ability to deal with the added expense without really worrying very much about whether it means inflation is coming."
Meanwhile, shareholders of oil companies are celebrating the higher prices, which have provided some spark to a battered sector of the market. On Friday, Exxon Mobil was 16 percent above its 52-week low, while Chevron was up 6 percent from its low of the year.
Oil service companies fared even better. Schlumberger was up 78 percent from the 52-week low it set last March, while Diamond Offshore Drilling was up 72 percent.
The sharper advance of the oil service companies makes sense, says Fadel Gheit, senior oil analyst at Fahnestock & Co. in New York. When oil prices are higher, big oil companies take in more money for every barrel of oil that's sold. As a result, they spend more heavily on equipment and maintenance, increasing revenues for the oil services companies.
"They are the first to benefit from improving industry fundamentals," Gheit says. "But on the other hand, they get whacked on the way down much sooner than the oil companies do."
Gheit says oil companies are likely to present Wall Street analysts with big, positive surprises this year as they turn in earnings well above estimates.
"Analysts gave up on oil prices six to seven months ago, thinking they had peaked" at about $27 per barrel, Gheit says. "Most people based their earnings expectations on $20 per barrel crude prices, so they'll be in for a nice surprise."
Some other sectors, however, will struggle if prices remain high. Airline stocks are most vulnerable to rising oil prices, but virtually any "old economy" company could incur higher costs for transportation and distribution of goods, analysts say.
And who will be least affected? The invincible Internet companies that require little oil or gasoline to create their products. "Those companies have little, if any, exposure to oil," Weiss says. "It doesn't affect them at all." |
