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

To: SargeK who wrote (40477)	3/20/1999 1:38:00 PM
From: SargeK	Read Replies (1) \| Respond to of 95453

A brief history of Oil Slicks BEAR MARKETS: osxstocks.com CRUDE EVENTs and PRICEs: wtrg.com CRUDE HISTORY: wtrg.com Next year visitors to the above web sites will see a 'block' with an 'arrow' pointing to March 23, 1999 as the day "OPEC/Non-OPEC gets their 'program' together". I deliberately avoided using a more illustrative four letter word lest I offend the sensibilities of the more culturally endowed among us. I think the point is clear, nevertheless. Besides, I have already been selectively removed from one board this week and I certainly do not wish to arouse the wrath of Jill, again.>grin< K

To: SargeK who wrote (40477)	3/20/1999 11:21:00 PM
From: Pete Young	Read Replies (2) \| Respond to of 95453

Sarge, Read some of the info at www.wtrg.com...and come away with a rather (near term) bearish impression. Consider this excerpt from this excellent site: OPEC's Failure to Control Crude Oil Prices OPEC has seldom been effective as a cartel. During the 1979-1980 period of rapidly increasing prices, Saudi Arabia's oil minister Ahmed Yamani repeatedly warned other members of OPEC that high prices would lead to a reduction in demand. His warnings fell on deaf ears. The rapid price increases caused several reactions among consumers: better insulation in new homes, increased insulation in many older homes, more energy efficiency in industrial processes, and automobiles with higher mileage. These factors along with a global recession caused a reduction in demand which led to falling crude prices. Unfortunately for OPEC only the global recession was temporary. Nobody rushed to remove insulation from their homes or to replace energy efficient plants and equipment -- much of the reaction to the oil price increase of the end of the decade was permanent and would not respond to lower prices with increased demand for oil. From 1982 to 1985 OPEC attempted to set production quotas low enough to stabilize prices. These attempts met with repeated failure as various members of OPEC would produce beyond their quotas. During most of this period Saudi Arabia acted as the swing producer cutting its production to stem the free falling prices. In August of 1985, the Saudis tired of this roll. They linked their oil prices to the spot market for crude and by early 1986 increased production from 2 MMBPD to 5 MMBPD. Crude oil prices plummeted below $10 per barrel by mid year. A December 1986 OPEC price accord set to target $18 per barrel was already breaking down by January of 1987. Prices remained weak. The price of crude oil spiked in 1990 with the uncertainty associated Iraqi invasion of Kuwait and the ensuing Gulf War, but following the war crude oil prices entered a steady decline until in 1994 inflation adjusted prices attained their lowest level since 1973. The price cycle then turned up. With a strong economy in the United States and a booming economy in Asia increased demand led a steady price recovery well into 1997. This came to a rapid end when the impact of the financial crisis in Asia was underestimated by OPEC. In December, OPEC increased its quotas 10 percent to 27.5 MMBPD but the rapid growth in Asian economies had come to a halt. If the EIA's crude oil price forecast is on target, this year will, on an inflation adjusted basis, surpass 1994 as the worst year for oil prices since 1973 How right EIA was! I just wonder now, given OPEC's track record, if this latest attempt to set prices will, like in the past, founder on cheating by members. Looking at the economic/political situation(s) of some of the producers, I wonder if they can hold the line on cheating. Even S.A. is really hurting, overvalued currency, and a larger than historically normal share of OPEC production as Iraq slowly comes back online. A more vibrant global economy seems like the only lasting boost that oil prices can get, and with widespread overcapacity in lots of industry (so we are told, anyway), one wonders if a global recovery can occur without some sort of demand-side boost. (A Marshall plan for the Third World in the form of debt relief?) The demand is there, it's just the ability to pay that's lacking... Longer term, according to a book I've read called (rather bluntly) "The Coming Oil Crisis" by C.J. Campbell (an old industry hand),as oil prices rise once again on global demand may continue up past historical norms. C.J. claims, in a nutshell, that global oil production is peaking as of the turn of the century, and makes a pretty persuasive case that not many elephants remain unshot, and as we go into the next decade, the West will be in for some unpleasant surprises in the form of the price of energy and who controls it. Perhaps this is what investors were thinking as the prices rose just before collapse in '97. Pete