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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: jim_p who wrote (71944)8/29/2000 3:33:17 PM
From: ItsAllCyclical  Read Replies (2) of 95453
 
Did anyone see the SI article about $40 oil? Quite a few folks from this thread were used.

siliconinvestor.com

Pretty good read, but they didn't really include what makes this bull run different imho. I sent this PM. I'm sure this is all review for everyone here, but I thought I'd include it in case I missed any points.

What makes this bull run DIFFERENT than past ones in the energy sector:

1) OPEC has very little excess supply. Some traders doubt whether OPEC has the extra supply to simply bring prices back below $30.

2) Supply/demand nearly equal. The 70's energy crisis was purely a supply phenon., but this one involves both supply and demand.

3) Oil service industry and Majors decimated from $12 oil. Only now are they beginning to open their purse strings. Non-OPEC production increases will not happen any time soon. Lack of workers, equipment in the oil service sector.

4) The simultaneous bull markets in BOTH oil and natural gas. Usually one or the other is high, but not both.

5) Iraq's production (a major producer) has been hurt tremendously by the Gulf War. When you don't get the parts and don't perform routine maintenance on your wells you get production declines. By some estimates this damage is now permanent.

6) Non-OPEC production has been in the decline stages for the last 10 years. We'll be lucky to maintain our share of the market let alone grow it. In a word...depletion.

7) Information technology, EPA air standards, new power generation and the internet are ensuring that the long term prices in NG will stay high for some time to come.

This is the real deal. We don't have an energy crisis yet...but the wolf is at the door (as Simmons would say).

Go and read the article comparing 1973 to 2000 by Matt Simmons. Great section on how hoarding contributed to the energy crisis. It's largely a perception issue. If the public believes we have an energy crisis they'll hoard NG, HO and crude and prices will go thru the roof.
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