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To: Tony Viola who wrote (100531)	3/8/2000 11:20:00 AM
From: GVTucker	Read Replies (1) \| Respond to of 186894

OT Tony, RE: Price of gas...as long as you're not a salesman on the road, or commuting 40 miles each way, is not a big hitter. Breakthrough today about more production from OPEC? The conventional wisdom is that the price of crude just doesn't hurt that much. I disagree strongly with that conventional wisdom. Today's computers, server farms, et. al. use a bundle of crude between the electricity that they need for power to the large amount of plastic needed to make them. Gasoline is a small part of the equation. Particularly when you look at the electricity side of things, there is a decent chance that there could be a severe shortage of natural gas this coming summer. If the economy does not slow significantly, natural gas demand could run 62 bcf/day. Current production is running about 48 bcf/day. Given that very little investment capital is flowing to the energy industry (thanks in large part to the outsized returns in the dot com world) current production is not expanding at all. We could see natural gas at $4 this summer versus current prices in the mid $2 range. And it will hurt all of us. Regarding OPEC, a big current misconception is that most of the OPEC countries can just turn on a switch and expand production. It isn't that simple. Most OPEC countries are actually now capacity constrained, and couldn't produce more if they wanted to. Even Saudi Arabia is already at 95% capacity. This is a result of the heavy debt that all of these countries incurred over the past decade. There just isn't that much investment in infrastructure, and thus there is oil in the ground but no way to get it out in any greater quantity. You're looking at a 6 month time range before it would be possible for any significant increase. OPEC is now trying to jawbone the market down with 'threats' to increase their production. These threats are largely empty.