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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: Mark Adams who wrote (2742)	6/26/2003 4:30:58 PM
From: Wyätt Gwyön	Respond to of 4905

Which I think reflects what Grace said earlier- in inflation adjusted terms, energy got cheaper during the late 80's and 90's. Hence the popularity of 4WD SUVs for suburban moms who probably never use 4WD. wait--i think even the most complacent energy optimist will recognize that 4WD SUVs are a step in the wrong direction from Toyota Corollas in terms of fuel consumption. so you can't point to these symbols of abject energy complacency as proof that greater efficiency has resulted in cheaper prices. i believe the low real energy prices of the past decades were a one-time anomaly--one could point to any number of causes; at the top of the list, of course, are the oil shocks of the 1970s which led to a tremendous increase in fuel efficiency and also sparked an energy boom. this brought on lots of supply--from places like the North Sea--which would not have seen the light of day until much later in the historical production curve absent the geopoliticial disruptions of the ME. subsequently, the Saudis started hiring Harvard-educated game theorists to help them strategize how to maximize their assets. what they learned and put into practice was that they should try to develop a sense of complacency and energy dependency in the West until Western non-OPEC sources fell to the backsides of their Hubbert peaks and allowed OPEC to gain 50% market share. at that point they would have the West over a barrel and could charge monopoly rents. this point--the "crossover point"--will be occurring later this decade. so, contrary to Grace's opinion, in reality the Saudis have sought not to maximize revenues in the short term (which they could easily have achieved by clamping down on supply), but instead to maximize the complacency and dependency of their "clients". the SUV is a cultural icon in American Suburbia, but it is also a symbol of the success of Saudi Arabia's long-term strategy. our response to the 70s shocks will not be replicable today. this is why oil is up nearly 200% off the lows of several years ago. remember? oil was supposed to be $12 a barrel after the war according to the clueless ignoramuses on TV. meanwhile, US natural gas prices continue to be at all time highs for this time of year, about double the level anticipated by the idiots who just spent $100 billion building gas-fired plants all around the country. once the weather stops cooperating it will of course get worse as the builds plummet. the numbers I've seen indicate a 70 year supply of found Natural Gas worldwide well, some 25% of that is owned by Gazprom, one of my largest holdings. they haven't found a good way to get that to market here, though. we only have four LNG terminals. LNG requires NG at $4 to be economically feasible, and in the past investors were burned badly by LNG terminals that ended up being uneconomic. this is the kind of thing where government regulation would probably be helpful. also keep in mind that these types of projects--as well as pipelines contemplated from Russia, require very long lead times and will not be of any use in the coming winter. Weissman has argued that NG storage is insufficient in the first place, and just developing more storage requires years. there's a lot of work to do, a lot of money to be spent...how much will happen on a timeline convenient to the middle class and below? thanks for mentioning the Chad piece; i will try to find it on ft.