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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Tulvio Durand who wrote (8511)	1/16/1998 4:02:00 PM
From: Tulvio Durand	Read Replies (3) \| Respond to of 95453

OSX up 5% today, seven times better than DJ's 0.75% gain. Ended at day's high. Those are positive TA signals, uh? Tulvio

To: Tulvio Durand who wrote (8511)	1/16/1998 4:43:00 PM
From: Czechsinthemail	Read Replies (2) \| Respond to of 95453

Tulvio, GLM's CEO saying they'd be hurt by $40 "because at the higher price, oil companies wouldn't have to drill as much to make a profit" is a misleading way of putting the situation. Oil companies would love to sell more oil at those higher prices and they would be more than willing to drill for it EXCEPT that demand drops off significantly at the higher price. Though they make more per barrel, they simply can't sell as many barrels, so drilling budgets are cut back. As Luigs points out, the key to the drilling business is oil consumption and the need to replenish reserves. Extremely high oil prices reduce the demand, which is really what drives the drilling budgets. If you turn the argument around, when there are lower prices with higher consumption, there is more need to drill to replenish depleting reserves. I think it is safe to say that lower oil prices are likely to increase marginal consumption. That increased consumption, in turn, will tend to provide support for oil prices and encourage further drilling. Baird