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Technology Stocks : The *NEW* Frank Coluccio Technology Forum -- Ignore unavailable to you. Want to Upgrade?

To: axial who wrote (2160)	2/25/2001 1:04:28 PM
From: Raymond Duray	Respond to of 46821

Hi Jim, Where will you go? Where, in North America, are you certain of a reliable, predictable supply of energy, at a known and acceptable price, for the next 10 years? Houston? Or Houston Street in NYC? Just kidding. It certainly seems to me that the suppliers of energy have been trying as hard as possible in negotiations with the Cal ISO and NY ISO to make sure that power contracts are as short a term as possible. This is the way that they see to create "market power" for themselves. Market power can be defined as the ability of one party to a contract negotiation to assume a disproportionate degree of control. The IPPs and the gas suppliers have certainly shown that they have cornered the market by driving the T&D guys into spot and "day ahead" markets and refusing, until Gov. Davis in particular, demanded long term contracts be reinstituted. The volatility in the energy markets is not inherent. It is part and parcel of the method of pricing that the power vendors prefer to use because it puts them in the most powerful position possible. Jesse Carr, the head of the Alaska teamsters had a marvelous way of put it: "If you got 'em by the balls, their hearts and minds will follow." Quite simply, the energy companies have been given too unequally powerful a position, should we assume that the running of a well ordered civilization trumps temporary market corners and profiteering for the few. Many free market zealots will disagree with me that there is an overriding interest that society has in maintaining stability and that this stability is more important than handsome profits for an elite few. It is no longer a question of if the markets will begin to factor in these realities, but when. To an extent, I think it already has occured. If you look at the OSX, the oil index, what you see is that it actually is heading down right now. Largely due to seasonality. But it was one of the best performing sectors of the market in 2000, so the market has noticed. The energy market is going to be a focus of Wall Street for a long time ahead, I believe. Here's an interesting fact. The worldwide capacity to build new drilling rigs is about 25 rigs per year. Yet the fleet is being forced to retire older rigs at a higher rate, in the face of declining reserves, particularly for gas. So one of the real conundrums for us is going to be how to finance more rigs, in the face of financial shortfalls for the drillers. This can only lead, IMO, to continuing tight supplies and much higher prices for energy going forward in order to justify the investment. Part of the stagflation scenario that seems to be in the cards coming up. Ray :)

To: axial who wrote (2160)	2/25/2001 2:01:26 PM
From: Frank A. Coluccio	Read Replies (1) \| Respond to of 46821

Hi Jim, "... the unpredictability of power supplies creates a societal ripple effect. To put it another way, we begin to introduce instability in the pattern of our existence." The stability of our existence is increasingly dependent, not just intellectually, but from a physical life-sustenance view as well, on technology. I question if each step going forward is able to stand on the accomplishments before it. In other words, from a physical power (and information) infrastructure perspective, are we moving forward in ways that are backwards compatible? Never mind predictable. Are we leveraging what exists already? The fuel cell concept vs. the regional/grid utility delivery method is very much like the bellhead vs nethead argument, where the new staple of interest (in networking it's smarts, and in power its generation) is moved to the edge and end points, instead of being centralized in the core. My suspicion is that some day the economies of scale arguments will be re-discovered. Or superconducting materials might make transmission more efficient. Who knows. One has to wonder about the drivers that would call for consolidation, in search of economies of scale. Will it re-occur where fragmentation and a more distributive environment has recently taken shape in so many areas of endeavor? Here we focus on telecoms and plower to a great extent, but those two sectors ripple and filter down to everything else in society, as you so astutely noted. Even if it takes some form of government intervention [holy cow... wow... did I write that?] to break the ice, as in the French nuclear power model you brought to the thread. It keeps ya' thinking, that's fer shir.