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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: SeachRE who wrote (269946)	7/3/2002 11:34:18 PM
From: JEB	Read Replies (1) \| Respond to of 769667

JFS says he knows how much oil is in the US and just off its shores, ...all of it, ...he knows every nook and cranny in the US that holds Texas Tea. I say he doesn't!

To: SeachRE who wrote (269946)	7/3/2002 11:40:15 PM
From: JEB	Read Replies (1) \| Respond to of 769667

I forgive you for driving. Oh, and if you are white, ...I forgive you for that too! That should be one less burden on your shoulders. Now, go have a good fourth of July!

To: SeachRE who wrote (269946)	7/4/2002 1:33:21 AM
From: Vincent Ramirez	Read Replies (1) \| Respond to of 769667

Oil Prices are Low. New Era with Supply < Demand. World Oil Forecast Vincent Ramirez, July 1, 1999 (This is a comprehensive report with a global review and summary. There are 12 figures. My only update would be to escalate prices more quickly, and to consider the Russians our new best friends. I own GazProm shares). members.aol.com SUMMARY The historic and present cycle of crude oil production has always been a regime of supply greater than demand as large fields of cheaply produced oil (i.e., free flowing) have been readily available. Production from these fields has large impacts on supply for at least 20 years after their discovery. Though the discovery of new reserves has tapered to insignificant amounts in the last decade, the production response to this is not yet generally perceived because “pump prices” remain flat. This is the result of previous discoveries which are now at their zenith. The world is definitely entering an era in which demand will be greater than supply. The only question is when, and is anticipated to be between year 2004 and 2020 by this report; but rather sooner than later, as the later date involves quite optimistic variables. Additional petroleum production from natural gas, oil sands and synthetic crude will delay or resolve future supply problems, but not at current prices of $18 per barrel. Rather, prices of $30 per barrel are anticipated immediately upon first acknowledgement by oil futures traders of real supply constraints. Subsequent inflationary pressures and increased production declines will quickly force prices to near $60 per barrel, at which time significant production from alternatives is feasible. There are three important things to note. First, the oil industry is perceived as having sent out this supply crises alarm several times already. As a result, the public is somewhat insulated from these warnings, including federal policy makers. I anticipate that tax and investment policies during the transition to “supply” economics will exaggerate the coming problem as economists continue to try and stimulate the non-energy business sector as it has traditionally done. A better solution would be to stimulate the energy sector early through tax and investment incentives, thus promoting a stable transition. A second point worth considering relates to the future increase in costs of world production. This point is often overlooked, as it is difficult to evaluate on a macro-economic scale. However, an analogy for a single oilfield is sufficient to understand the future costs of world production. Initial production from new oilfields encounters virgin pressures and these wells flow oil naturally, at prices around $1 per barrel for direct operating costs (without transportation). Declining reservoir pressure due to oil production eventually requires artificial lift to raise oil to the surface, with costs in the $3 to $5 per barrel range. These costs continue to increase as concurrent water production (and disposal) increases and water eventually becomes 99% of the total produced fluid before the oil field is abandoned. Additional oil may be recovered through secondary techniques, but these costs are around $8 per barrel, minimum, and consume about 20% of the energy, or crude, produced. All fields are produced in this manner, and costs are directly related to reservoir pressure. World production today is dominated by the Middle East Gulf region which has a large part of its reserves in fields that still have high reservoir pressures, and as a result production costs, with transportation, are less than $5 per barrel – currently. This will change as reservoir pressures naturally decline due to production. The impact of this is far greater than “future production forecasts” imply, as a world with Saudi Arabia producing from artificial lift is quite different than one in which Saudi Arabia produces from free flowing wells – though the “remaining reserves” might seem significant. The immediate impact is that threats of $5 per barrel oil will no longer be realistic if all producers create deficits with temporary overproduction. Thus, the floor price for crude oil will continue to increase. The point of this long explanation is that total reserves numbers are misleading – as they promote a view that supply will be fine until the day the last drop of oil is produced – and on that day, we have a problem. Rather, we should be aware that average world reservoir pressures are declining naturally, and operating costs are increasing. These affects will be felt concurrent with actual supply constrictions and will have a dominant impact on future crude prices, particularly the floor prices. A third point worth mentioning has to do with previous responses to oil supply constrictions. The one example of this occurred from 1974 to 1981, and during this time, oil prices lifted from to $4 to $38 per barrel. In hindsight, this is often regarded as a “panic response”, because in fact macroeconomists have concluded there was no real shortage. Whether or not this is true, I regard the period of a good example of the oil price volatility to be expected when real supply constrictions do occur. “He who produces last makes the most money” will be the doctrine of the future, though it would hardly seem that anyone gives any thought to this idea. This concept seems contrary to modern business principles of valuation based on net present value, but this is only a result of using flat oil price forecasts far into the future.