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Strategies & Market Trends : Stock Attack -- A Complete Analysis
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To: donald sew who wrote (30009)9/16/2000 7:28:36 PM
From: Jack T. Pearson  Read Replies (1) of 42787
 
I spent the past week in England and have some thoughts on the long term consequences of the petrol (gasoline/diesel) crisis there and in Europe. There appears to be very broad support for fuel tax reductions across Europe. The current European governments are between a rock and a hard spot. If they lower fuel taxes, they will also have to reduce expenditures. If they maintain current fuel tax levels, their opposition will lower fuel taxes after the next elections. I believe survival needs will motivate current governments to cut fuel taxes and claim/pray that increased demand will produce tax revenue that significantly offsets what is lost in cutting taxes per liter. Either way, I believe fuel taxes will drop significantly across Europe.

What does that mean to us? Much higher world market oil prices. If fuel prices in Europe drop, demand will rise. Given current resistance to oil production increases, I don't think we will get a corresponding rise in oil production that matches an increase in European demand. Prices would rise until supply and demand is again in balance.

So, even if OPEC increases oil production in the short term to somewhat reduce oil prices, it is likely to be only a temporary respite before Europeans cut fuel taxes, further driving up demand, and world oil prices.
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