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

To: Sharp_End_Of_Drill who wrote (88596)	3/15/2001 9:42:32 PM
From: BigBull	Read Replies (2) \| Respond to of 95453

Sharp, it seems to me that the only way the capacity constraints argument makes sense is if demand remains constant or increases, while the wealth of OPEC customers increases. Only under those conditions does OPEC maintain strong leverage. Imo, the game has now changed and radically so. With worldwide economies plunging now, demand for product will follow as the night follows day. Likewise, there will be no industrial economy willing to lower energy taxes under these deteriorating economic conditions. Rather, OPEC's efforts to keep energy prices high while industrial economies plunge will make OPEC an easy political target. Demonizing OPEC will be easy and relentless. Any continuing attempts to get "the West" to lower energy taxes will go down to ignominious defeat. The equation is now very simple - continued high current oil prices create a longer and deeper recession which will lead to ever lower oil prices and continuing necessity for cuts. Vicious circle type stuff. At this point in the cycle - OPEC capacity constraints will become less and less an issue with each passing week and economic stat that comes out. Under current conditions, most companies have very little pricing power, (witness Clorox's current report) therefore continued high energy prices will result in forcing conpanys into a box. To maintain margins or market share they must idle plants and continue to layoff labor. Vicious not virtuous circle. Imo OPEC has blown it, the recessions are here. The window of opportunity is closed for maintaining $25 oil. Oil prices need to and will go lower. End of story. Imo the latest OPEC quota compliance numbers do not bode well for continued OPEC discipline. OPEC is cutting slightly over 1 mbpd, not 1.5 with Iran being the biggest quota buster. OPEC resolve (read Saudi) is about to receive it's customary severe test.