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

To: Les H who wrote (28365)	8/26/1998 9:38:00 AM
From: Captain James T. Kirk	Respond to of 95453

Spillover effect of world oil glut Depressed petroleum prices could lead to political unrest By Rob Reynolds CNBC WASHINGTON Aug 25 - The current price of a gallon of gas, adjusted for inflation, is lower than it has ever been this century, finds Lundberg Surveys Inc., which tracks the oil sector. But as with all good things, there's a catch. The downside to low oil prices is potential political and economic upheaval worldwide. "OIL PRICES really present a great geopolitical risk. It's a big problem for the West," said market-watcher Michael Metz of CIBC Oppenheimer. U.S. Secretary of Energy, Bill Richardson, who took office Monday, disagrees. He says there is little risk of political instability. But low oil prices have contributed to current economic crises from Russia to Venezuela, and things could get worse. Russia is still recovering from last week's market turmoil and ruble devaluation and this week's government shakeup. The Venezuelan currency, the bolivar, has depreciated about 14 percent so far this year, and some experts predict an additional 25 percent decline. There is also concern, in both countries, about how serious the governments are about implementing strict economic reforms. "The worse-case scenario is that you have enormous political unrest in these oil-producing countries," said Metz. The oil producers are partly to blame. Members of the Organization for Petroleum Exporting Countries (OPEC) have failed to abide by pledges to reduce their output. Data for July show that the 11 OPEC nations met only half of the cutbacks they promised in June. Mexico, Norway and Russia, non-OPEC members that had also promised to cut production, also failed to substantially reduce their oil output. Beyond the political ramifications, low oil prices have a depressing effect on demand for American-made goods. "Everyone likes to fill-up their car and pay a lot less to do it, and we are all enjoying that. The downside is that somewhere else somebody who was selling oil at a higher price and enjoying greater revenue is going to be less in the market for American products," said James Placke of Cambridge Energy Resources. The good news or bad news - depending on your point of view - is that most experts think oil prices have gone about as low as they can go and are likely to head up soon. "You have sort of an inventory glut to some extent - a sort of negative psychology in the marketplace. I have a feeling the worst is probably over," said Metz.