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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (18072)	8/26/2004 7:25:53 AM
From: Wyätt Gwyön	Respond to of 110194

an oil executive is an overpaid bureaucrat whose main job is to cover his ass while making as much personal money as possible, and secondly to make money for shareholders. his job is not to save the world from high oil prices. CYA here means not taking on prospects that break even at anything above $20 or $25 crude, preferably $18 or so. the fact is, those prospects don't exist anymore in locations with a modicum of geopolitical stability, and oil profits are already sky-high. according to that article, the top six US and European oil cos will have cash flow of $138 billion this year--let tech investors stick that in their crack pipe and smoke it! since the market has priced energy producers with such low PEs compared to other sectors, it is not surprising that oil executives would rather return capital to investors than to invest in risky projects, which even if successful would only be rewarded with single-digit PEs. basically the market is providing no incentive to increase capex, and that has to be a huge factor. oil executives are very aware of the dire situation. Lee Raymond and even Cheney have publicly mused about how the world is going to pull the equivalent of 80% of today's production out of its ass in new fields, just to keep production from declining due to declines in existing fields over the next decade. look at the majors and their organic production levels are declining. i think we have already seen what will happen: because the best prospects are in hazardous areas like Iraq which private companies cannot approach on their own, the US will simply try to take over these "greenfields" and socialize the production costs in the name of "freedom".