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

To: Raymond Duray who wrote (544)	6/15/2001 1:16:36 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 1715

I can sense the seeds of over-capacity coming into the crude market. Can't disagree with you there.. But building NEW capacity would be different that REPLACING existing capacity with newer, more efficient technology. Building a new refinery is really a red herring (but a necessary one). Because as soon as it is online, an older less effcient one will eventually be taken off line, or moth-balled for use as a "peaker" or as a spare in case of a disruption at another refinery. So these guys have to make their money while they can, so they can raise the financing for these new facilities and receive a good ROI. Either that, or ship our refining capacity to Mexico and build a pipeline up here to distribute it. And because I sense that much of the world is VERY prone to fall into a deep recession, with the US prone to a mild one, I think we're likely to see more downside to the oil market. And btw, the "silver bullet" for solving the cyclicality problem is called the futures market. Just like a farmer might write a contract for his harvest, sacrificing potential upside should a shortage occur, he gains insurance against a surplus that drives down prices. This is what happens with oil, and people need to understand that. Those companies, and energy purchasers, who properly use the futures market can really go far to mitigating those sudden price spikes. That's what California seems to have denied themselves when they were forbidden to purchase long-term contracts. And personally, I would rather not have US economic security held hostage to Saudi Arabia, or any other Persian Gulf state, or even Chavez down in Venezuela. Hawk