Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Art Bechhoefer who wrote (92345)	7/16/2001 7:54:06 PM
From: BigBull	Read Replies (3) of 95453

Au contraire, mon ami. The differences between the TRC and OPEC are huuuuuge. Here's some off the top of my old grey noggin. <well not that grey yet <g>> 1. During the TRC heyday the US was THE world wide swing producer and even then, with the discovery of the black giant in East Texas, "hot oil" was notoriously difficult to control. It took both sustained low prices in the 1930's and National Guard bayonets to control it. OPEC does not have that policing power at it's disposal. It has only market place pain. Imo $26 oil is not sufficient discipline. My goodness, the last time it took ten dollar oil and near revolution in key OPEC countries for these guys to come to their senses. 2. The history of the oil business is that every time a major new source of oil was found an inevitable downward adjustment of prices followed, almost irrespective of economic conditions. Khazakhstan and Caspian oil is such a major new source of crude. If Kazakh oil deposits even remotely approach the size of Saudi deposits then the question is not if they will be developed but when and how. I hasten to remind you that neither Angola, Kazakhstan, or Brazil are members of OPEC. Russia neither, And at $26 a barrel they will pump as much as they can as soon as they can. Never mind other Russian sources or Russian access to superior Western production technology. 3. Major new sources of oil can and will produce an international struggle for market share in a now shrinking market. Imo OPEC has a far larger geographic area to attempt to impose discipline on price than Texas. This is hardly trivial and will both highlight and exascerbate OPEC's key weaknesses - geographic disparity and lack of police power. OPEC overproduction at this point wouldn't in the least surprise me. The aim? Simple. Drop prices low and keep that damned Kazakh oil in the ground for a loooooooooooooong time. I sense the tectonic plates of the "Grand Game" shifting. Wanna play in a fault zone with ole Bullsky? <gggggg> The control of oil prices has been pursued by Standard Oil, The TRC, The Majors together, and now OPEC. Only the TRC and the majors together have been remotely successfull and then for only relatively brief times and under unique circumstances. I do not believe now is such a time.

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