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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: David Zgodzinski who wrote (68659)	3/16/2003 8:34:22 PM
From: nspolar	Read Replies (1) \| Respond to of 209892

Dave, there is also a flip side. The XOI imo does not appear to be that healthy, and could be projecting a long and deep recession, wherein demand gets pummeled. I can tell you from my vantage point, on the inside, that things are not that great within the petroleum industry. Previous periods like we are currently going through have marked bottoms. This one seems to be digging in and deeper. In my view the situation is similar to that within many other industries. Profit margins just don't cut it, even when crude and gas are fetching good prices. The volatility is a negative as well. The petroleum industry is extremely capital intensive, and we buy a lot more than PC's, that have come down in price. Much of what we buy has probably continued up in price. Things could be worse, but we have benefited from new technology and increased productivity, like a lot of other sectors. This is most true in regard to drilling and reservoir depletion. Unfortunately this has not been enough to be a complete offset to the very high cost of doing business, mostly in hostile environments. Hostile meaning remote, or politically unappealing. It is difficult to put a finger on what might give. The economy can not tolerate increasing energy prices, without demand getting pummeled. The petroleum industry can not invest large sums in hostile environments, without high prices. Most of the prospects are in hostile environments. I've also thought it possible the refining and chemical side of the industry could end up like our steel industries. No reason those industries have to be here, and this country is no longer blessed with abundant sources of crude. Just some thoughts. I am watching the sectors with interest. If XOI, XNG and OSX get wrung out here, I feel some good investments are likely. Eventually things will change for the better, and a lot of capital needs to be spent in these industries.