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

To: Think4Yourself who wrote (73260)	9/13/2000 9:17:28 AM
From: Terry D	Read Replies (1) \| Respond to of 95453

The NYTimes has joined the hand wringing with this over wrought outburst on today's editorial page. September 13, 2000 The Latest Oil Shock The high price of oil is both a testament to the current global economic boom and a threat to its continuation. The heartening news is that the oil- producing nations themselves seem to realize this, and are intent on trying to drive prices lower. Whether there is enough unused production capacity to accomplish this in the short run remains to be seen, but the political will to try is welcome. Crude oil surged past the $35-a-barrel mark on Monday, its highest level in a decade. Protesters in Britain blockaded refineries, threatening to bring the nation to a standstill. They demanded that the government reduce fuel taxes. Images of panicked drivers seeking to hoard fuel before most service stations closed brought back painful memories of the 1970's oil crisis. Prime Minister Tony Blair refused to follow the lead of the French government, which reduced its fuel taxes by 15 percent last week, but instead sought contingency powers to control the distribution of fuel. Largely because of high taxes, European consumers typically pay more than twice what Americans do to fill up their cars. This week's rise in oil prices came despite a decision by the Organization of Petroleum Exporting Countries over the weekend to increase output by 800,000 barrels a day, or 3 percent. The group's shaky credibility partly accounts for the market's skeptical reaction. Some of the cartel nations already produce more than their quota, and it is unclear how much additional oil will actually be pumped. The overheated global economy has left little production capacity underused outside of Saudi Arabia. As a result the OPEC president, Ali Rodriguez, who is also Venezuela's oil minister, warned yesterday that the world may be facing a severe energy crisis. President Hugo Chávez of Venezuela, who will soon play host to a meeting of heads of state from the OPEC nations, has been aggressively pushing for a target price band between $22 and $28 a barrel. The idea is to have the cartel automatically adjust production when the price of crude oil moves above or below the band. Such a mechanism would require an unprecedented degree of coordination among OPEC members, and is not likely to work as smoothly as Mr. Chávez suggests. But it could help stem the volatility in oil pricing. Inflation in the United States is showing signs of revival in response to higher oil prices, the one cloud in an otherwise rosy economic outlook. The promised increase in crude production from OPEC and an increase in global production capacity expected late this year may not be timely enough to alleviate what is expected to be a sharp rise in domestic heating oil prices this winter. President Clinton said yesterday the government would seek to counter rising heating costs. The high crude oil prices seem all the more serious because the world enjoyed unusually low fuel prices for much of the past decade. But in real terms the price of oil is a third lower than it was in 1990, though that may prove of little comfort to European drivers forced to pay about $4 a gallon at the pump, or to those struggling developing nations that must import oil. Predicting movements in oil prices is impossible, but there is reason to be hopeful the world is not confronting an oil crisis akin to that of the early 1970's. The industrialized world is less vulnerable to an oil shock, and retains some options to counter persistently high oil prices, at least temporarily. Europe could lower tax rates on fuel. America could draw oil from its strategic reserve. The best solution would be a steep increase in production by oil producers, especially Saudi Arabia.