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

To: Wildstar who wrote (32815)	12/14/1998 11:56:00 AM
From: Tomas	Read Replies (1) \| Respond to of 95453

One reason not to be gloomy over ten dollar oil From OGJ Online, December 12 The demoralization is palpable. Oil prices have tanked. Exxon and Mobil are merging. Press reports slam-dunk a cause-effect relationship. Suddenly, worried people in the oil industry are asking, "If Exxon and Mobil are willing to test the limits of antitrust politics in order to survive $10/bbl oil, what are the rest of us supposed to do?" That part of their gloom is misdirected. There's more to the biggest industrial merger in history than cheap oil. The prospective cost savings certainly gain allure with crude prices where they are now. But Exxons and Mobils don't marry one another because of a market slump. Their hook-up is a strategic move that was probably under consideration at some level long before Asia's economic crash sabotaged oil values. The view here remains that an important strategic purpose of the merger is to gain advantage in competition for upstream projects in Saudi Arabia--when those projects open up to international capital (see last week's contribution to this forum). Exxon and Mobil, both former Aramco partners, could of course hold their own in that competition and handle Saudi projects solo. But the combined organization, with 5.5 million b/d of refining capacity, offers much comfort to an exporter loath to subject its crude to trading. It thus gives the owner of all that capacity an advantage over lesser and less-well-located refiners in negotiations with the Saudis over upstream deals. This market slump is real and terrible. Ten-dollar crude is ravaging the budgets and payrolls of oil companies and service firms. It is wrecking producing-nation economies. There are plenty of good reasons to be gloomy about it. The Exxon-Mobil merger just isn't one of them.