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To: Tomas who wrote (74452)	9/24/2000 7:10:31 PM
From: Razorbak	Respond to of 95453

TheStreet.com: "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. thestreet.com

To: Tomas who wrote (74452)	9/24/2000 7:28:55 PM
From: Tomas	Read Replies (3) \| Respond to of 95453

"If this wasn't an election year, I don't think we'd see the oil. I do think it's politically motivated. They are setting a precedent here. I'm still calling this a correction in the up-trend. I don't think we've seen the last of high crude oil prices. The problem has not been crude supply, it has been product supplies. You could see a dollar or two on the downside, but I have my doubts it is going to fix the problem of heating oil. Three-quarters of the price fall has already been priced in." Tom Benz, Senior analyst at Paribas Futures in New York, Sept.22 ____________________________________________________________ "It's a very symbolic gesture. There may be a problem when you really need that reserve. I don't think we're in a crisis mode. U.S. refineries are running at 94.7% of their capacity. We're running full-tilt. You've got to turn that crude into usable oil. It's not like you can just open the spigot, and out pokes fuel oil. If you look at the real price of oil versus just about every other thing that we consume today, oil is still dirt cheap. It's probably one of our most resourceful commodities that we have. You get a lot of bang for your buck with a barrel of oil. This economy has done very well over the past few years, and to a large part it has been because the price of oil was so cheap." Donato Eassey at Merrill Lynch, Sept.22 ____________________________________________________________ "Adding government oil to the market at a time when refiners already are running close to their capacity doesn't make economic sense. The oil would go to a tank, and it's going to stay in the tank, as refiners can't boost processing rates, he said. Much of the additional supplies from Saudi Arabia, the world's top producer, and other OPEC members is of a less desirable 'heavy' grade of oil that's more difficult and costly for refiners to process into gasoline, heating oil and other fuels. The SPR oil also consists of this caliber of oil. It's heavy crude oil, not the light they need." Leo Drollas, deputy executive director of the Centre for Global Energy Studies in London, Sept.22 ____________________________________________________________ "The major producers appear to be doing all they can to get as much oil as possible to market to take advantage of high prices, despite accusations to the contrary by Vice President Al Gore and other politicians. These companies are not idiots -- they would be producing as much as they can. Perhaps (critics) can point the finger of blame at companies who are effectively producing all they can. They're an easy target, but they're probably the wrong target." Banc of America Securities analyst Tyler Dann, Sept. 23 ____________________________________________________________ "Oil companies, large and small, cannot just turn on and off their production every time the price goes down or up. It takes a while to mobilize and demobilize." Fadel Gheit, energy analyst for Fahenstock & Co, citing the decline of existing fields and long periods of time it takes to get new reserves to market. ____________________________________________________________ "Refinery capacity hasn't increased in more than a decade because of weakness on that side of the business. The existing refining infrastructure is unable to convert incoming crude into enough gasoline, heating oil and other products to meet demand." Bill Gilmer, oil analyst with the Federal Reserve Bank of Dallas, Sept. 23 ____________________________________________________________ Referring to the release of crude oil from the reserves: "The difficulty here is trying to estimate to what extent the market has already priced this in. We're already well off our price highs and there had been numbers mentioned as high as 60 million barrels. The market may see a relief rally on Monday as some traders decide that the size of the release could have been worse. We'll also have to see how quickly the DOE can actually execute this plan because they need to find a home for it in terms of someone to deliver the oil to, and it might take a couple of weeks to negotiate the terms for that and to start the oil flowing." Tim Evans, a senior energy analyst at New York-based IFR Pegasus, Sept.23