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

To: Tomas who wrote (75222)	10/1/2000 11:40:59 AM
From: Tomas	Read Replies (2) \| Respond to of 95453

How serious is shortage threat? The question of US stock levels of crude oil has been the subject of many debates this year Financial Times, September 29 by Robert Corzine ... "In one sense, we have gone from just-in-time to almost not enough," according to Joe Stanislaw at Cambridge Energy Research Associates (Cera) in Massachusetts. Some analysts believe that the changing structure of the downstream industry in the US may have also added to the impetus to keep minimal stocks on hand. The development of what some analysts refer to as "financial refiners", such as Tosco and Ultramar Diamond Shamrock, has been an industry trend in recent years. These companies have mainly bought refineries from large, integrated oil groups which have been keen to shed high capital, low margin downstream assets. The only way such specialist refiners can maintain profitability is to run their operations more efficiently and with lower overheads than their previous owners. Given that annual carrying costs of inventory in the oil industry can amount to about 25 per cent of value, there is a big incentive to keep stocks at levels just above that which might cause sales disruptions. But even refineries owned by the big integrated oil groups are being held to ever more demanding financial performance criteria, say analysts, thus ensuring that just-in-time techniques are adopted industrywide. Some observers suspect that companies might try to take advantage of such a finely balanced system by artificially creating shortages that drive up prices. Cera's Mr Stanislaw doubts that the companies are doing so, but acknowledges that there is little flexibility left in the system to react to events such as the panic buying which swept the UK in September. The inflexibility of the US energy supply system has been exacerbated by both regulation and legislation. "In the US, we have legislated away refinery capacity," says Michael Rothman, head of energy research at brokers Merrill Lynch in New York. The adoption of new fuel quality standards without reference to the implications of such regulatory changes on the commercial structure of the oil and natural gas industry has been the most prominent problem. But the system is littered with other potential and real logistical bottlenecks. Last summer, gasoline prices in the Midwest spiked sharply upwards after technical problems plagued the main pipeline serving the region. The inflexibility of the system meant that oil companies had to send gasoline in tankers all the way from the Gulf coast to the Great Lakes via the Saint Lawrence Seaway. Industry executives said the bottlenecks have been caused, in part, by industry's inability to secure local planning and environmental approvals for new pipelines, fuel terminals and other logistical facilities. ...