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Pastimes : The California Energy Crisis - Information & Forum -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (540)	6/15/2001 1:03:54 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 1715

Hi Hawkmoon, Thanks for that exceptionally informative article by Stephen Gaut. It really is a cut above most of the discussion of the economics of petroleum. Re: And although we gripe now about "gouging" by "big oil" companies, no one seemed to care when they were essentially selling gasoline "at cost" back in November, 1999 - January, 2000 time frame. While the politicians and consumer advocates went silent on the matter, in the back of my mind, I reasoned that the lack of profit that the industry was suffering through would result in a deficiency in E & P (exploration and production). That, in fact, the cyclicality of the industry, in spite of best efforts on the part of many industry participants, cannot be tamed. Right now, we are at the top of the cycle, with profits and prices high, but I can see the rig rate, I can sense the seeds of over-capacity coming into the crude market. Now, the only thing that the refiners can do to preserve their profitability is to make sure that refining capacity is added as slowly as possible. Because it's a certainty that if new refining capacity is added, and the economy continues to tank, that the price of crude and refined products have only one direction to go in. And that is down. An observation I've made of the oil (and now the natural gas) industry is that the market mechanism is prone to extreme price swings. On balance, a 1% over or undersupply of crude vis a vis final demand will, over the course of a couple of months result in about an $8.00 swing in the price of crude. A 2% oversupply, which was the case in late '98, resulted in a decline of about 66% in the price per barrel. While this is nowhere near as obscene as the crash in 1930, when the new East Texas fields drove the price of crude down to 10 cents a barrel, it is still a hugely problematic situation for the industry. I don't have a magic bullet to solve this cyclicality problem. Obviously, big supplier like Saudi Arabia can ameliorate this situation to a degree. I'm of the opinion that, as with electricity, what I would ideally like to see is a fair and reasonable profit for the suppliers, and mechanisms in place to control the wild swings that markets inevitably cause. In this regard, I am very much in agreement with George Soros, who, while capitalizing on the swings of the market, has no illusion that markets create supply/demand balance or that markets tend to stabilize. His view, and mine, is that so-called "free" markets, inevitably tend to run amok, and to the extremes and never reach the point of balance, except as they veer from one side of the pendulum swing to the other. JM2C, Ray :)

To: Hawkmoon who wrote (540)	6/16/2001 1:54:55 AM
From: Father Terrence	Read Replies (1) \| Respond to of 1715

Hawkmoon, you're besting him, That;s why he is going on the attack. And this that he wrote... You've been non-responsive, because you can not refute my superior view of your puerile grasping for profit at the expense of a well organized economy/society/culture ... is pure nonsense. His "superior view"? Haha! At his base he really believes that a need gives him, or a people, or a State the "right" to demand all they want from a producer at any price they decide is "fair." In essence, it is the cry of the parasite. A parasite cannot produce, so it elevates its need for whatever YOU produce into a right. See how it works? If they can make the producer feel guilty along the way, well, so much the better.