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

To: Roebear who wrote (74410)	9/24/2000 8:20:35 AM
From: Post_Patrol	Respond to of 95453

Oil-Slick Politics By Christopher Edmonds Special to TheStreet.com Originally posted at 5:45 PM ET 9/22/00 on RealMoney.com Unlike oil and water, oil and politics do mix, especially in a presidential election year. That's exactly what George W. Bush is finding out Friday as the Gore-Clinton Camp looked down the bench to the reserves -- the Strategic Petroleum Reserve. Energy Secretary Bill Richardson announced the Clinton Administration has agreed to release 30 million barrels of oil from the reserve to ensure that Americans stay warm over the winter. Many oil analysts and the Clinton Administration have expressed concern that heating oil will be in short supply, especially if winter is extremely cold. However, many analysts think this is nothing more than oil-slick politics. "This isn't about heating oil," says Jim Wicklund, director of energy research at Dain Rauscher Wessels. "It's a political stunt and it's stupid, foolish and grandstanding." Richardson denied political antics were behind the announcement. "This is not political. The president wants to help people get heating oil and heat their homes," he said at a press conference, also noting the move was not an attempt to influence potentially skyrocketing costs of heating oil. "This isn't about price but to deal with disruption." Unfortunately, the attempt to control heating-oil inventories through release of crude supplies is overly simplistic. As this column has noted, the problem is not just about supply, but also with refining capacity. "Heating oil isn't crude oil," says Dan Pickering, director of research for Simmons & Company, a Houston-based energy research and investment firm. "It has to refined and refining is tight." Pickering says refining is running at or above 97% capacity, near practical limits. Ironically, the move may stand to benefit refiners at the expense of consumers. The release of additional crude inventory will lower the price of crude available to refiners, meaning input costs will drop. However, since refining remains tight, supplies of heating oil will remain tight and prices will remain high, thus improving profits for refiners. "The good news is for refiners: Their cost of crude should decline and margins should improve," says Pickering. Oil dropped below $33 a barrel in Friday's trading and may fall further in reaction to the news. What does the news mean for energy stocks that have moved higher in tandem with oil prices? "It's probably a short-term negative for the oil stocks," says Dain Rauscher's Wicklund. "However, it really shouldn't have an impact on the oil-service sector. I'd be buying any weakness." At some point, the reserves will have to be replaced, likely with OPEC oil down the road, which caused Wicklund to quip, "This is robbing Peter to pay Paul." And, while it may not add much real warmth in a cold winter, you know it has to warm Al Gore's heart. -------------------------------------------------------------------------------- Christopher S. Edmonds is president of Resource Dynamics, a private financial consulting firm based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to Chris Edmonds . --------------------------------------------------------------------------------