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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (1949)	9/18/2000 12:28:13 AM
From: Selectric II	Read Replies (1) \| Respond to of 65232

Re: "(My Note - technology is once again improving the ability to find new reserves & reduce the cost of extracting existing reserves. The supplies are there & new reserves are being found. The costs of finding & extracting it are going down while the price of oil goes up. What company/country with any notable amount of non performing known reserves now is going to sit on it at while oil sells for historically high prices? Why?)" Questions in response to your question: 1. What's the lead time required to find and extract oil? Lots of planning and allocation of resources at huge costs may be required. One risk is that prices could go back down to where it isn't profitable to produce, even before a single barrel is extracted, and with huge sunk costs. 2. What role has the government played in providing dis-incentives toward exploration, production, and lower prices? Clinton/Gore WANTS high fuel prices for environmental and alternative energy reasons -- Gore's said so, and he's voted in favor of them! Alternative energy sources haven't been price competitive, so Clinton/Gore wants to jack up oil costs to make them more so. Were they caught napping as they say? Nah. Just spin. Higher prices are what they want. (Not just because of Gore's huge holdings in Occidental Petroleum through a family trust.) 3. With taxes on gas, oil, and related products being a significant percentage of the price you and I pay, what incentive do the people who do the real work -- finding, extracting, refining, and delivering oil products to you -- have to reduce prices or their profits, only to find that government takes up any price slack "for the sake of the environment"? The oil companies' share is just one slice of the pie (or space at the trough, as the case may be). 4. With #'s 1-3 above, what incentive does OPEC have to reduce prices? Not much. That's a reason why the Saudi's said we should lower our fuel taxes -- a fact which was much LESS widely reported by the US television and newspaper news media than George W. Bush's mispronunciation of a word -- and which I'm sure everyone on SI will agree (not!) is of more profound economic and political significance than high oil prices, which might likely produce a world-wide recession. The news media hasn't taken the administration to task on this at all. Please don't come back with the environment argument. I'm all for a safe and clean environment. But I fear we might be getting only a glimpse here of the economic costs of a Gore energy and environmental policy. Have you seen the reports of gasoline in the UK at $5+ a gallon, with Tony Blair smugly refusing any tax relief? Well, guess who Tony Blair's friends and political allies are on this side of the pond. Off my soap box.