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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (4195)	6/28/2001 12:44:12 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

First, we think that Saudi Arabia changed its oil policy in 1997 from one that sought [price] stability at about $18 to one that actually seeks extreme volatility. It's folks like you posting articles like that which make this a must read discussion thread here on SI. I never thought of Saudi oil policy from that perspective before. I knew they possessed huge national debt issues that required higher oil prices, but never thought about how they would seek to prevent competition from infringing on their market share by crashing prices. If true, this could make for some VERY interesting trading opportunities in long term oil options contracts. Hawk

To: John Pitera who wrote (4195)	6/28/2001 1:26:33 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 33421

Hi John, Thanks for posting the Barron's article on crude oil. This jumped out at me in light of the current price decline.... >>The economics of this business are such that the least efficient oil companies can more than earn their cost of capital at $16 or $17 oil. From an economic standpoint, $28-$29 oil creates a return on capital employed in exploration and production from major oil companies of about 30%. Over the last 10 years that has averaged 15%. Ultimately, if the price of oil stays too high, it will encourage overinvestment.<< Just pondering if the secret energy talks that are being held with Cheney are having any impact. One would naturally assume that the talks may be focusing exploration and investment with prices at the higher end of the scale. That certainly would not benefit the Saudi's in the long run.