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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

GLD 393.24

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Dec 11 4:00 PM EST

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To: Slagle who wrote (1431)	10/22/2005 4:54:56 PM
From: Elroy Jetson	Read Replies (2) of 218435

Consider two actions of Sour Oil producers, Venezuela and Saudi Arabia. About ten years ago, Petroleos Venezuela bought refiner and marketing company Citgo petroleum (Cities Services) based in Tulsa Oklahoma because they were the only buyer for their Sour Crude production. Citgo upgraded their refineries, and as Citgo says, "Most of the crude CITGO processes is sour crude, from Venezuela and Mexico." Imagine needing to purchase an American refiner just to be able to force them to upgrade to handle Sour Crude so you can sell it! Two years ago Saudi Arabia offered to build several new Sour Crude refineries in the U.S. at their expense. The oil companies responded to this generous offer with the sound of no hands clapping. Now Saudi Arabia has agreed to upgrade old refineries, and Shell has taken them up on their offer for their Motiva refinery in Port Arthur. In time other refiners may see their way clear to accept this "free refinery" offer. Imagine being a producer of Sour Crude and the only way you can envision being able to sell your crude is to offer $10 billion in free refinery upgrades. Now "peak oil" theorists will tell you that Venezuela and Saudi Arabia are "part of the conspiracy" to keep "peak oil" under wraps! What about oil companies? Chevron will drill for potential new oil reserves if the reserve will be economic at an oil price of $27.50 per barrel. Other oil companies have similar price hurdles in the "twenties". But the price of oil is over $60 and "peak oil" folks tell you its headed over $100 soon! Why don't the major oil companies raise their price hurdle for drilling new projects to $35 per barrel or $45 or $55. Doesn't limiting your exploration and production to projects profitable at $27.50 limit the supply of oil?? Wouldn't they make even more drilling for $55 oil since oil is soon headed to $100? Because major oil companies don't believe in "peak oil". But "peak oil" proponents will inform you that large oil companies are also "part of the conspiracy" to keep "peak oil" under wraps. Don't you begin to suspect that these "peak oil" proponents are really "tin-foil hat nutters"? Since I worked at Chevron, I know I can trust what they say, because I know how highly honesty was valued when I worked there. I'd trust Chevron over Matt Simmons and his band of conspiracy buffs any day. Could Chevron and other companies lower crude prices and their refining profits by upgrading additional refineries, at $3 billion each, to handle Sour Crude? YES Could Chevron and other companies over time create a vast amount of new petroleum reserves by raising their price hurdle for drilling new projects above $27.50 per barrel? YES Will Chevron and other oil companies eliminate their dividends to raise the money to create these investment which will destroy their profit margins and endanger the financial stability of their business? NO Why would any business do that to themselves? That's just completely crazy to expect that to happen. Yet many "free market" wackos claim it would happen if this were possible. I can't imagine why. .

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