So the price of oil has risen because of big oil profiteering by withholding supplies? [see original message below] But only the other day, Doug Henwood was posting about how the world was awash with oil which apparently no-one wants to buy. So which is the truth? It would be nice if people followed a line for more than a few days at a time; on the other hand, if all that is required by way of refutation is to repost what Doug said three days ago, it does make things easier I suppose. Doug Henwood (an economist) thinks 'there is plenty of oil' and it's just a question of supply and demand. The truth is that there is plenty of oil but not plenty of CHEAP oil. $11/bbl wellhead price is NOT cheap by historical standards. If that is the marker price for what the oil patch now calls 'conventional oil' then it is a sign of coming economic distress. I am seriously glad if Doug Henwood is researching the subject (at last!) but it is no good just reading economists (although reading Daniel Yergin's or even Greg Nowell's books is a useful beginning). 'Avoiding boom-bust' has been the precise definition of the oil industry ever since the 1860s when John D Rockefeller drove the Pennsylvanian wildcatters from the market by cornering the railroad supply system. But the question of supply is fundamentally determined by GEOLOGY not by economic cycles or market-actor behaviour. I am posting extensively about this on the Crashlist, and the Crashlist archive is open. The url is: http://lists.wwpublish.com/mailman/listinfo/crashlist Mark > -----Original Message----- > From: [EMAIL PROTECTED] > [mailto:[EMAIL PROTECTED]]On Behalf Of Rob Schaap > Sent: 19 September 2000 09:33 > To: [EMAIL PROTECTED] > Subject: Re: [Marxism-Thaxis] Why 'alternatives' are no alternative > > > G'day Thaxists, > > In the interests of balance, I've pinched this from Doug. The depletion > emergency / technological replacement crisis angle has been well put > already. Here's the dominance-of-finance angle. Itself pretty damned > scary, I reckon ... > > Cheers, > Rob. > > Business Week - September 25, 2000 > > > Commentary: Big Oil's Priority: Pump Up the Stock Price > By Christopher Palmeri > > > It has been the problem that won't go away: the skyrocketing price of > oil. Already three times this year, OPEC has increased its oil > production quotas in an effort to alleviate the pressure. > > > So what about the major non-OPEC oil companies, who, along with a > number of non-OPEC nations, collectively produce more than half of > the world's crude? Surprisingly, while OPEC is pumping harder than it > has in decades, some of the world's largest oil companies are > actually producing less. BP (BPA) slashed its production by 4% and > midsize producers such as Texaco Inc. (TX) and Occidental Petroleum > Corp. (OXY) have been even less active. Both saw their worldwide oil > output slide 7% in the first half of this year. Together, ten of the > largest reduced their output by 0.4% in the first half of this year, > according to a recent report from Merrill Lynch & Co. ''The lack of a > production increase from non-OPEC sources is a big reason why prices > remain high,'' says Merrill Lynch analyst Steven A. Pfeifer. > > > Many longtime industry watchers say that's because a new reality has > set in among the world's oil titans. Wall Street has demanded that > companies like ExxonMobil Corp. (XOM) and the Royal Dutch/Shell Group > (RD) increase profits to buttress their long-languishing stock prices > and avoid the boom-and-bust cycles that once defined the industry. > Daniel J. Rice, manager of the $800 million State Street Global > Natural Resources fund, is one of many money managers who, under > threat of selling off shares, has continually pressured oil company > executives not to overspend in the pursuit of production increases. > ''We give them money, they produce a lot more, and the price goes > down,'' he says. > > > The focus on profits has only been excacerbated as oil companies on > Wall Street have had to compete for capital with technology companies > and other outperforming stocks. As a result, the majors have reacted > to the current crude price runup by being ultraconservative in > pursuing new fields. ''The major oil companies are not responding to > the high prices with significantly increased exploration and > production spending,'' explains Pfeifer. > > > Consequently, last year, while prices were on the rise, oil companies > replaced just 92% of their production through new discoveries. That > was below their three-year average replacement rate of 95%, according > to Arthur Andersen. > > > To be sure, the world's oil companies are not asleep at the well. > This year, Merrill Lynch is expecting exploration and production > spending at the companies it follows to rebound by 16% to nearly $34 > billion. Unfortunately for the world's energy consumers, most of that > spending is coming in the second half of the year and won't translate > into new oil supplies for many months. > > > And not everyone is opening their spigots. Exxon and Royal Dutch > slashed their oil exploration and production budgets by more than 30% > in the first half of this year. At Chevron Corp. (CHV), the cuts were > less severe, but a still hefty 8% drop. > > > But with oil now bouncing around the mid-$30s, how do these producers > continue to rationalize such tightfistedness? Many cite the fact that > it was a scant two years ago that overproduction in the face of > weakening demand from Asia caused the price of oil to fall to a > meager $10 a barrel. Producers are naturally wary of a repeat. ''We > take the long view of oil and gas prices,'' says Chevron Corp. > Chairman and Chief Executive David J. O'Reilly. ''It's > counterproductive to overreact to prices that are either atypically > low or high.'' > > > STIFF CRITERIA. Recent statements by some of the men who run the > major oil companies reveal just how conservative they have become > regarding their pricing forecasts and their production investment > decisions. The key in determining new spending these days is not how > high oil is--it's how far it could fall. BP Amoco PLC Chairman John > Browne put out a press release in July that said his company only > invests in projects that will be profitable at prices as low as $11 a > barrel. ExxonMobil Chairman Lee Raymond told analysts much the same > thing in August: ''All projects must meet our return-on-capital > requirements in a low-price environment.'' > > > Given such stringent investment criteria for new wells, it's no > wonder that high prices have left the major oil companies gushing > profits. At the ten large companies tracked by Merrill Lynch, net > income more than doubled in the first half of this year, to $26.4 > billion. ''The new mantra at the oil giants is conservative and > cynical,'' says Arthur L. Smith, chairman of oil company researcher > John S. Herold Inc. ''After years of being bludgeoned by > institutional investors about their low returns on capital, they are > out to prove they can make money.'' Faced with a choice between > making Wall Street happy or pleasing the world's energy consumers, > the major oil companies have clearly chosen sides. > > > Palmeri covers the oil industry from Los Angeles. > > > _______________________________________________ > Marxism-Thaxis mailing list > [EMAIL PROTECTED] > To change your options or unsubscribe go to: > http://lists.wwpublish.com/mailman/listinfo/marxism-thaxis > _______________________________________________ Crashlist resources: http://website.lineone.net/~resource_base To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/crashlist
