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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: pz who wrote (30817)10/16/1998 7:54:00 PM
From: diana g  Read Replies (1) of 95453
 
Re:"...what drives these stocks..."

Hi Paul, I think oil price is certainly a factor, but isn't this rally based on the assumption of increased future Demand?

What if, through some strange circumstance ('new car runs on solar power'), demand shrunk 90% but price went to $25 brl. I think the drillers and service companies would be in Big Trouble.

If, on the other hand, demand doubled, drilling and service companies would be going full blast at high margins and growing like Topsy as long as the price of oil was just a little bit higher than the cost of production.

I think Price, Supply and Demand are linked in a complex way. Price effects both Supply and Demand, of course. Supply moderates Demand, but the Driver of Oil Service and Drillers is basically DEMAND, first and foremost.

Disagreement and Correction Welcome,

regards,

diana
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