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Gold/Mining/Energy : Oil & Gas Price Economics
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To: Don Crespino who wrote (6)12/1/1998 10:42:00 AM
From: Rod Copeland  Read Replies (1) of 350
 
Let's try to look at this from the perspective of the producing OPEC countries.
I have read that the only country that can produce at a profit with prices below $10/bbl is Saudi Arabia. That means that all the other OPEC nations are at breakeven or a loss. I see no way that prices can remain at today's levels for any extended period of time. It makes no sense at all. The motivation for continued selling at these prices is 1) economic survival and 2) market share. Economic survival will not be possible for any of the OPEC nations at these prices. They are almost totally dependent on oil revenues. As far as market share is concerned, the Saudi's have the hammer. They are the wealthiest (but spoiled) country and they have the reserves and production capability to wait out the other countries. Once the fact that they are truly "giving away" their finite asset base (and their future) they will trim their sails (and sales).
I would not be surprised to see some kind of radical announcement from the OPEC guru's at any time. These countries are facing economic stress like never felt before. Protracted prices at these levels will lead to upheaval. They will determine a price level they feel they can live with and endure some additional pain to get the price back up to that level. One emotion stronger than greed is that of survival.
Boy, I hope I'm right.
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