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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 (24507)	6/22/1998 1:09:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 95453

Tulvio, the point I'm trying to make is that the key here is not the price of oil-- it is a surrogate for the supply of oil that can be pumped. The price of oil moved lower in response to decreased demand. I'm saying that that is a symptom -- not the cause of the problem for drillers. Isn't it true that the absolute number of barrels pumped has declined? And doesn't that imply that existing wells will have a longer life now than had been anticipated eight months ago? And doesn't this argue that there is less compulsion to find new oil and drill new wells? This analysis is perfectly consistent with the points Baird has raised. But I think it also goes beyond the relatively simplistic argument that reduced profits for the e&p companies reduces exploration budgets. Instead, it argues that because of the reduced puming there is a reduction in the need to develop new fields in the near future. This analysis argues that the price of oil is not the key, rather, it is the rate at which oil is consumed. In fact, this analysis would argue that artificially increasing the price of oil through production quotas is bad for the drillers because it would result in reduced production. TTFN, CTC