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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: BigBull who wrote (72766)	9/9/2000 10:08:28 AM
From: jim_p	Read Replies (2) \| Respond to of 95453

BigBull, Just the opposite, 1973 led to the "Windfall Profits Tax" on oil producers. I hope we are smarter this time around. I did a lot of buying on Friday. The fundamentals are just to strong to not buy when stocks are down as much as 16% in one day. It may go lower, but I have a lot of margin power left over to buy more if I'm to early. Monday could be a nice rally if we get, or don't get, an OPEC consensus over the weekend. The only oil left in the world to be sold today has no market for the oil. We don't have the refinery capacity to refine more heavy high sulfur oil. You can't sell what the market can't buy. What the world needs is more sweet crude, and we simply don't have it to sell period. When the OPEC meetings are over and the world realizes there is no solution short of a dramatic increase in exploration and several years of time, the OSX will move up to the next level. I'm back to buying on the dips. (sorry Slider, but I did buy some gold stocks last week) Jim

To: BigBull who wrote (72766)	9/9/2000 11:38:29 AM
From: isopatch	Respond to of 95453

Big Bull. The windfall profits tax was just PART of the reaction by U.S. politicians to the 70s oil shocks. Unfortunately the extent of big government reprisals against oil producers and investors went further. The key oil depletion allowance had been 22% before the 70s oil shocks. The depletion allowance in the federal tax code is a VERY important incentive to for new exploration as well as encouraging investment in and application of advanced technology to substantially improve recovery of petroleum from existing "mature" fields and provinces (such as the basin I'm involved in). Unfortunately the depletion allowance was systematically reduced down into the teens. In effect, during a period when our industry was being called upon to increase it's activity, the gov punishes it with massive tax increases! Now it could be argued that the increase in the price of oil during the 70s was sufficient for adequate long term growth in our industry. But I disagree. Punitive taxes and regulation has the effect of limiting what would otherwise be the normal growth in the industry during a boom period. The flip side of that coin is that the industry will suffer more severe contraction than otherwise would be the case during subsequent bust periods. This is exactly what we've witnessed during the prolonged period of decline in our domestic industry in the 17 years since the major peak in the early 80s. The oil price strength during the Gulf War and the more important but truncated 96/97 boom period really didn't balance the severe erosion during the down periods. Our employment base (as is being painfully demonstrated in one news story after another) has been dangerously DEPLETED and will only be rebuilt at greater cost than should have been the case. Also, the anti-business, big government policies have held back sufficient capital flow into the patch for normal or advance E&P technology other than at a later time in each of our post 1980s up cycles. Isopatch OT/ Will have to leave these issues for you guys to wrestle with for awhile. Big soccer day. Cya<G>.

To: BigBull who wrote (72766)	9/9/2000 11:50:21 AM
From: ItsAllCyclical	Read Replies (1) \| Respond to of 95453

This article goes to the heart of why so many oil bears believe oil over $18-20 is not sustainable. This Simmon article is relatively old (May 1999), but very relevent to our current discussion about where oil prices will/could settle. Since it was published near the turning point of oil prices I imagine many here have not read it. simmonsco-intl.com Why Oil Prices Need To Rise; The Illusions of Oilfield Costs and Technology, published in the May 1999 issue of Louisiana State University’s Oil, Gas & Energy Quarterly I just read it for the first time myself and found it excellent. Even though I consider myself well informed I was also of the mistaken notion that these oil companies were able to find oil for $6/barrel and be profitable at $15. At least that's the impression the Majors give the general public. When I look at these numbers I start to think $25 is far more sustainable than $15 (taking the long view). Just like our productivity statistics these accounting tricks can be very dangerous. Each company wants to show the lowest finding costs, but as an industry they'd be better served showing the "true costs". If the true costs were more widely known and accepted then oil traders would be far less likely to take prices below $15 for any length of time. A catch-22 if you ask me.

To: BigBull who wrote (72766)	9/9/2000 12:21:17 PM
From: BCherry168	Respond to of 95453

Your question was directed to others, but since I was there, I will respond. The 1973 crisis led to price controls, no new incentives ( they did do the "old oil"/"new oil" bit. We had the RARE I and RARE II Wilderness proposals withdrawing large amounts of National Forests from drilling. We had the "Windfall Profits Tax." We had Carter's regulation of intrastate natural gas - after he had promised to deregulate all natural gas. We had the "Fuel Use Act." In short, government's response was to make the problem worse, not better. The government, without regard to the party in power, has been making the situation worse all the time up to and including right now. IMHO, we can expect the US to continue to make things worse, while blaming the oil companies and OPEC for all of the problems.