[CTRL] BARBEQUE AND CRUDE OIL

Nakano Nakamura Fri, 16 Nov 2001 09:20:27 -0800

-Caveat Lector-

We now have the lowest energy prices since Sept 98
thru Feb 99 when the Dept. of Energy reported the
lowest inflation-adjusted gas prices since they began
keeping records. Also, we have the lowest interest
rates in 40 years (thanks to the Federal Reserve).
Interest rates and energy prices are the 2 largest
factors affecting the "cost of living".  It's an
interesting coincidence that both are at rock bottom
at the same time....as they were during Clinton's
Impeachment in the House and the Senatetrial.
My point is that these things are manipulated and
controlled. Economists tell us these things are
controlled by "market forces".  It should be obvious
that far more than market forces are involved.
It's also interesting that Russia makes this
announcement the day after Putin and Bush enjoy
Texas barbeque down at the ranch.
     Nakano

"...the United States would receive a much-needed lift
from plummeting energy costs, with consumers freed to
spend more on holiday purchases..."
"OPEC leaders acknowledge that Russia has become the
market's linchpin. "We cannot have cuts without
Russia,"

New York Times
Oil Prices Tumble to 2-Year Low
November 16, 2001
By SABRINA TAVERNISE with NEELA BANERJEE

MOSCOW, Nov. 15 - Oil prices went into free fall today
as
Russia, the world's biggest oil exporter after Saudi
Arabia, rejected a challenge from the Organization of
the
Petroleum Exporting Countries to stabilize prices by
sharply cutting production. [And this announcement
comes one day after Putin has barbeque with Bush at
the Texas ranch]

Prices in New York dropped 11.6 percent, to $17.45 a
barrel, their lowest level in more than two years.
Crude
oil prices have fallen 21 percent this week.

Analysts said the recession-bound economy of the
United
States would receive a much-needed lift from
plummeting
energy costs, with consumers freed to spend more on
holiday
purchases and with beleaguered airlines and cargo
haulers
bearing one less burden.

Experts added that Russia's stance reflected both the
government's limited control over Russian oil
companies and
Moscow's post- Sept. 11 collaboration with the West.
Russia
and the United States, they added, share OPEC's
concerns
that prices might fall too far and shake regimes whose
stability is especially critical to the war on
terrorism.

OPEC leaders acknowledged that their unexpected
decision on
Wednesday not to reduce oil production unless other
major
exporters did the same amounted to the declaration of
a
price war.

The cartel's gamble is that falling oil prices will
persuade its competitors to blink and join in
production
cuts. OPEC said it expected Norway and Mexico, the
second-
and third- largest producers outside the group, to
come
around.

But Prime Minister Mikhail Kasyanov of Russia said
today
during an official visit to Spain that his country
would
resist "any big reductions" beyond the token reduction
of
30,000 barrels a day that it promised earlier in the
week.

In a telephone interview from Spain, Aleksei Volin,
the
deputy head of the Russian government's
administration,
explained that deeper cuts could endanger Russia's
obligations to its customers in Europe, where it sends
most
of its oil exports.

OPEC leaders acknowledge that Russia has become the
market's linchpin. "We cannot have cuts without
Russia,"
Adil Khalid al-Subih, Kuwait's oil minister, said in
an
interview in Vienna. "We will not support any cuts
without
a significant contribution from non-OPEC nations. They
know
exactly what they are doing. It is not a matter of
convincing them."

The question that will loom larger each day, OPEC
officials
and industry experts said, is who will surrender
first, as
prices enter a tailspin and ravage economies highly
dependent on oil revenues.

"It's a game of chicken," said Roger Diwan, managing
director at the Petroleum Finance Company, a
consulting
group in Washington. "OPEC wants to scare Russia and
the
Russian oil companies. They want to show that with low
oil
prices, everybody will hurt."

To bolster oil prices in a slowing global economy,
OPEC has
pared its daily output three times this year for a
total of
3.5 million barrels, or 13 percent. But the cartel's
rivals
have responded by increasing their production,
grabbing
market share and cashing in on prices that have
averaged
more than $25 a barrel.

OPEC's 10 voting members have said that they will no
longer
tolerate that situation. They proposed on Wednesday
that
OPEC would reduce output by a further 1.5 million
barrels a
day as of Jan. 1, if non-OPEC producers cut by a total
of
500,000 barrels a day.

For Russia, the decision to defy OPEC may be less a
national energy strategy and more an effort to avoid
confrontation with the country's powerful oil
companies.
Under Russian law, the government has some control
over oil
exports. But unlike the situations in Mexico and
Norway, in
Russia most of the industry is in private hands and
the
government has been hesitant to force companies to
cut.

Some Russian companies that have worked the hardest to
increase production and restore an industry that had
collapsed with the fall of the Soviet Union are
adamantly
opposed to cuts. They would force layoffs, executives
argue, and waste expensive new technology bought over
the
last three years.

"If they say we have to cut, we will cut, but I'll do
everything I can to show it is unreasonable," Mikhail
Khodorkovsky, chief executive of Yukos, Russia's
second-largest oil producer, said today at a news
conference in Moscow.

Still, Russia's warming relations with the United
States
since Sept. 11 may also be playing a role in its oil
policy. President Vladimir V. Putin reiterated last
month
that Russia could serve the West as an alternative
source
of energy to a destabilized Middle East.

Mr. Khodorkovsky echoed that theme today. "We can
propose a
real partnership with the West in creating a stable
market
for oil," he said. "That window of opportunity is
today."

Other Russian oil companies indicated, however, that
there
was room for compromise with OPEC, in part because a
further slide in oil prices - to $15 a barrel or less
-
would force the layoffs or cutbacks in exploration and
production that they are trying to avoid.

Lukoil, its biggest producer, said the Russian oil
industry
could withstand a cut of 200,000 to 300,000 barrels a
day.
The third-largest producer, Tyumen Oil, said it would
begin
trimming its investment program if prices fell below
$17 a
barrel.

One high-level OPEC official said today that the
United
States government would be concerned, too, if prices
fell
below about $15 a barrel. The Americans, he said,
understand that as Persian Gulf nations lose oil
revenue,
the welfare states they support come under stress.
That, he
said, could pose more of a threat to their stability
than
bombing raids in Afghanistan that are unpopular among
many
Arab citizens.

Dr. Subih, the Kuwait oil minister, told reporters in
Vienna that prices could fall to $10 a barrel - a
level not
flirted with since late 1998 - if non- OPEC producers
did
not join the cartel in cutting production. A price
war, he
acknowledged, could be damaging to OPEC members, whose
economies are lopsidedly reliant on oil revenue.

But the cartel is betting that Russia, too, will feel
the
pain. Oil is at the heart of Russia's economy;
together
with natural gas, it makes up half of the country's
earnings from exports. The Moscow government's federal
budget is balanced delicately on an oil price of about
$20.
This year's budget surplus provides a cushion, but a
long
period of low prices could mean difficult spending
cuts in
2003, when foreign debt payments of about $19 billion
come
due.

"For the next year their position is secure; the
question
is the year 2003," said Aleksei Zabotkine, chief
economist
at the United Financial Group (news/quote), an
investment
bank based in Moscow. "If the oil price doesn't
reverse
itself, then we will see a rather unpleasant
situation."

Even so, Russia has never followed through on past
promises
to cut oil exports, and most analysts here do not
expect
this time to be different.

"Russia wants to appease OPEC, but it will not do
anything
concrete," said Dmitri Avdeev, an oil analyst at
United
Financial (news/quote). "Exports might fall because of
seasonal factors, but production will continue to
rise."

http://www.nytimes.com/2001/11/16/business/16OIL.html?ex=1006932820&ei=1&en=26e3384012309e3b

New York Times
Oil Prices Tumble to 2-Year Low
November 16, 2001
By SABRINA TAVERNISE with NEELA BANERJEE

Prices in New York dropped 11.6 percent, to $17.45 a
barrel, their lowest level in more than two years.
Crude
oil prices have fallen 21 percent this week.

Analysts said We now have the lowest energy prices
since Sept 98
thru Feb 99 when the
Dept. of Energy reported the lowest inflation-adjusted
gas prices since
they began keeping records. Also, we have the lowest
interest rates in
40 years (thanks to the Federal Reserve). Interest
rates and energy
prices are the 2 largest factors in the "cost of
living". It's an
interesting coincidence that both are at rock bottom
at the same time....as
they were during Clinton's Impeachment and Senate
trial. My point is that
these things are manipulated and controlled. More than
market forces
are involved. JC