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Politics : Foreign Affairs Discussion Group

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To: Dayuhan who wrote (92568)	4/12/2003 7:35:31 AM
From: quehubo	Read Replies (1) of 281500

Steven - It is good to see that although you are not an O&G industry insider or an O&G investor that you are a very good understanding of the oil market fundamentals. Even a few years without the war premium would provide a nice return to the global economy. But I agree, future instability in producer nations will lead to increased risk premiums. In August, who knows what Chavez will do with the referendum. Nigeria seems ready to explode. Indonesia is another example of an unstable producer. Any risk premiums added to oil supply by these countries would be cumulative to the impact on the oil market of Iraq or from impact of instability in Iran or SA. A revolt or instability in Iran or Saudia Arabia is inevitable, we may have just accelerated the process a little by cleaning out the festering sore of Iraq in the region. A recent example of a poor understanding of the energy market fundamentals was posted here recently. The posts where about a fuel cell car or some other more expensive automobile that will not use gasoline or be much more efficient. This wont be something that the world, especially Americans, will accept freely. When oil supply is tight enough, energy prices will compel people to buy expensive cars that are more efficient. The demand for fuel by developing countries will lead this movement to more efficient cars. In theory if one American can afford to buy a very expensive car that is very efficient or does not use gasoline, the supply made available will be used by maybe 5 people from developing countries who buy their first moped. The USA with a population <300 million uses ~25% of all petroleum, the other 6 billion people will want to use their share. My guess is that Iraqi's will be a leading incremental user of energy. With any luck they will use allot of their own incremental production over what they would have been doing with Saddam in power. Growing economies in the Mideast, economies growing outside their energy industries, can increase demand rapidly.

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