Richy Richardson tries to gain control of Y2K-flation: Oil

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In case you missed it, today was DOE, Saudi, Iraqi headline day for competing interests. A rather interesting display to say the least. Best I can make out, the scenario I painted yesterday is comming to pass. It's my belief that the Chinese and the Russians are going to participate in a vote to say no to extending the Iraq food/oil deal. What the hell does this have to do with Y2K? Everything. Sadman Horsemane has painted us into an inflationary corner along with the "newly organized and vigilant" OPEC. For the first time in twenty years, these guys haven't blown it. In fact, they may be playing some very dicey games with our economy. Let's start with my original theory, Saddy cuts off his 2.4 or so million bpd at a time when supply pressures are hosing us into high oil prices. Then he baits the UN into rolling another deal after collecting his payday on the IPE futures markets. The UN and our brilliant state department go thru all the motions of getting this thing going and ......just like the weapons inspections, Saddy screws us in the end (pun not intended).

Clinton and Greeny seeing prices going north every day and sweating the inflation call for the Pillsbury DOE boy to make some very agressive statements on SPR barrels and how the price of oil is "a bit high" "to high" "concerning" blah blah blah. This is an attempt to talk the market down. Then they compound it by issuing some funny stories about the upcomming UN meeting (this Saturday) which is where the UN will vote on the OIL/FOOD extension. But midway through the article, buried in paragraph 5 or so is the little tidbit that the Chinese and Russians are "expected to abstain" from voting. The article asserts that "as long as they abstain, the resolution should pass". Now, if I were a drunken Yeltsin, bombing the hell out of Chechnya, having my pillaging of IMF funds investigated, and seeing the hardline commies drooling at the idea of my untimely demise, would I turn down a request from my old buddy Sodom Husseny? Probably not. I would probably assert my buddies good intentions on dismantling his chem warfare is quite enough and he is an entirely trust worthy fellow.

Now, midway through the game today, the Saudi's got wind of Richy Richardsons comments on the "price of oil". The Saudi's immediately took time away from the ardous task of tallying their recent financial gains to begin issuing some rather interesting statements to the tune of..."nobody but us is allowed to comment on oil prices" and "we'll supply any incremental Y2K bbls. necessary for the good of mankind". These articles were pretty silly. I mean afterall, who the hell wouldn't expect them to jump in and add spare capacity (if in fact they're still running on Jan 1)? I never would have guessed that they would want to supply extra barrels to an oil thirsty market in a time of crisis! What humanitarians these guys are. We can all rest easy now that the "men in sheets" are on the job. Gee I wonder if maybe they'll just give us the barrels for free? Duh.

My prediction: Crude goes higher, UN votes are tallied and we lose and Saddy wins on Oil for Food, No SPR bbls are sold, as that would be simply stupid at this time. Clinton comes up with some hairbrained scheme to get the price of crude down (tax breaks for producers, etc). Who knows, I've been wrong before and I'll be wrong again, but this is my best guess.

Strange days indeed.

For educational and research purposes only:

Some headlines from today:

99/12/09 RTR US presses for vote on Iraqi resolution Saturday

99/12/09 RTR FOCUS-Oil dives as Iraq signals renewed exports

99/12/09 PGA 115--Security Council to vote Saturday on Iraq omnibus

99/12/09 RTR PLATT'S: Security Council to vote Saturday on Iraq omnibus measure

99/12/09 RTR Iraq and Romania start talks to boost trade ties

99/12/09 RTR Iraq accuses Saudis of backing US bids at UN-paper

99/12/09 RTR Iraq urges UN to halt Turkish military incursion

99/12/09 RTR Oil traders hope to see Iraqi oil in one week

99/12/09 RTR FOCUS-Iraq prepares to resume pumping oil for export

99/12/09 RTR Iraqi pumping station adds 70,000 bpd Kirkuk oil

99/12/09 RTR IPE Brent slides as Iraq signals renewed exports

99/12/09 RTR IRAQ SAYS WILL RESUME PUMPING OIL FOR EXPORTS SATURDAY IF UN RENEWS 6-MONTH OIL DEAL

99/12/09 RTR Iraq to pump Sat if UN votes Fri for 6-month deal

99/12/09 RTR ACCESS crudes higher, despite likely Iraqi exports

99/12/08 PGA 377--Lengthy Iraq disruption not certain: Naimi

99/12/08 RTR FOCUS-US wants Iraq vote but Russia, China hesitate

99/12/08 RTR FOCUS-Oil rises; US stockbuilds, Iraq calms fears

Here's the stories:

DOE's Richardson: oil prices "dangerously" high U.S. ENERGY SEC'Y RICHARDSON SAYS $27 PER BBL OIL PRICE IS "BIT HIGH" RICHARDSON-WILL WATCH OIL PRICES NEXT FEW WKS, THEN MULL OPTIONS TO LOWER PRICES WASHINGTON, Dec 9 (Reuters) - U.S. Energy Secretary Bill Richardson said on Thursday that world oil prices were drifting "dangerously" high and if necessary, he would recommend options to the White House to lower them. "Prices have been drifting into what I see as dangerously high levels," Richardson told reporters after speaking at an energy conference. He refused to say whether a sale of oil from the nation's Strategic Petroleum Reserve was among the options that might be considered. When asked what he considered to be an unacceptably high price, Richardson said $27 for a barrel was "a bit high." He did not elaborate. The Clinton Administration will be closely monitoring oil prices over the next few weeks with an eye toward possible steps to lower prices, if necessary. "I want to see what will happen in the next few weeks to determine what other action we might take. We have options," he said. Richardson also said he was concerned that soaring oil prices could slow the U.S. economy's robust growth. "Our objective is to keep the American economy strong and I don't want inordinately high oil prices to adversely affect this administration's economic policy," he said. ((Tom Doggett, 202 898 8467 washington.commodsenergy.newsroom@reuters.com)) [O] [ELN] [US] [WASH] [PROD] [CRU] [ENR] [OPEC] [NGS] [LEN] [RTRS] [AA] [TALALERT] [MD] [MEAST]

FOCUS-US frets over oil prices, ready for Y2K snags (new throughout) By Tom Doggett WASHINGTON, Dec 9 (Reuters) - The Clinton administration said Thursday that oil prices have soared to "dangerously high" levels, and crude oil would be sold from the nation's emergency stockpile if already-tight supplies are disrupted by Y2K computer problems at year-end. Contingency plans for selling oil from the Strategic Petroleum Reserve are designed to protect consumers and businesses from a steep rise in world crude oil prices that hit nine-year highs in recent weeks. "The plans rely on the Strategic Petroleum Reserve," Energy Secretary Bill Richardson said at an energy conference. "The president, if he deems it necessary, can sign these findings at the appropriate time and put our plans into action." "This is not to suggest that there is a problem, only that we are prepared," Richardson added. The reserve, created after the Arab oil embargo of the 1970s, holds about 572 million barrels of oil. He gave no details about what level of disruption would trigger the sale of stockpiled oil. While the millennium computer bug problem is a major concern, Richardson also made it clear that the administration was closely monitoring current oil prices with an eye toward possible action if necessary. He said $27 a barrel, slightly above current prices, was "a bit high." "Prices have been drifting into what I see as dangerously high levels," he told reporters. "I want to see what will happen in the next few weeks to determine what other action we might take. We have options." Sustained high oil prices could slow the robust U.S. economy, according to some economists. "Our objective is to keep the American economy strong and I don't want inordinately high oil prices to adversely affect this administration's economic policy," Richardson said. Richardson met Thursday with Saudi oil minister Ali al-Naimi in Washington. Saudi Arabia, which helped design the OPEC production cuts that have more than doubled world oil prices during the past year, is the world's biggest oil producer. The Saudis have already promised to help replace any world oil supplies that dry up because of Y2K problems. The so-called Y2K problem refers to a computer's inability to recognize the year 2000. If not fixed by software programmers, the millennium bug has the potential of crashing computers that help control oil tankers, pipelines, refineries and other industry operations. Naimi told reporters after meeting with Richardson that he believed the U.S. oil reserve would only be tapped for major emergencies -- such as Y2K disruptions -- and would not be used a tool by the Clinton Administration to ease oil prices. "We understand that the SPR would not be used to adjust market prices. We understand that the market will do that function," Naimi said. Stable world oil markets are crucial, he said. "We seek neither low prices nor high prices but instead stable, well-supplied oil markets," he said. "We're more concerned with gyrations in the market." Richardson said he had already discussed with his counterparts from Mexico and Venezuela what actions could be taken if world oil supplies were abruptly curtailed at the end of the month because of malfunctioning computers. "We are developing a communications plan to keep us in concert up to, during, and after the rollover in addition to each of our contingency plans in the event that there is an oil supply disruption somewhere," Richardson added, referring to similar plans by Mexico and Venezuela. The U.S. Energy Information Administration recently said that in case of an emergency, the nation's stockpiled oil could be moved into the world oil market as in as little as 15 days. U.S. lawmakers from northeastern states -- where many homeowners depend on heating oil -- have pressed the administration to tap the oil reserve now to ease prices. Oil prices have hovered above $26 a barrel in recent days amid reports that world oil supplies are being drained at a faster rate than expected. Prices also rose from Iraq's export halt as a bargaining chip with the United Nations over terms of sales allowed under its oil-for-food program. [O] [ELN] [E] [U] [RNP] [US] [CRU] [PROD] [NGS] [ELG] [ENR] [DPR] [MEAST] [LEN] [RTRS]

248--NYMEX crude plunges on Richardson comments, technicals New York (Platt's)--9Dec1999/116 pm EST/1816 GMT January NYMEX crude was bearish in midday trade Thursday, dropping through $26.35/bbl support to bottom out at $25.95, down 59 cts. Product prices also fell. January unleaded fell 181 points to 71.40 cts, while heating oil dropped to 64.80 cts, down 172 points. News that US Energy Secretary Bill Richardson said oil prices are "too high" was bearish, said one trader. Richardson said he has asked his staff to present him with contingency options in the next two weeks that could be taken if prices rise to an unaccpetable level (see story 1713 GMT). Thin year-end and pre-holiday volume was helping exaggerate the market's reaction however, one trader said. Other traders attributed losses primarily to technicals following a failed early morning attempt to push crude through $26.75 resistance. --Platt's Global Alert-- [0248] [P] [GM] [N] [QQ]

245--Saudis repeat vow to release oil if Y2K disrupts supplies New York (Platt's)--9Dec1999/111 pm EST/1811 GMT Saudi Arabian Oil Minister Ali Naimi Thursday said he and US Energy Secretary Bill Richardson discussed Y2K-related issues and market conditions during a meeting in Washington. "We have reaffirmed our position that if there were to be a disruption" as a result of Y2K computer problems, Saudi Arabia is ready to provide supplies, Naimi said. Naimi also said he and Richardson discussed current prices, which the US Energy Secretary termed "too high" earlier Thursday. "Everybody is concerned about prices, whether they are too high or too low," Naimi said. "We seek neither low prices nor high prices, but stable prices." Richardson did not say the US would use the Strategic Petroleum Reserve, Naimi said, adding it was Naimi's belief that the reserve would only be used in supply emergencies, not as a result of high prices. Begins p245 --Platt's Global Alert-- [0245] [GE] [GM] [N] [QQ]

369--Saudis standing by to meet any Y2K oil supply disruption London (Platt's)--9Dec1999/802 am EST/1302 GMT Saudi Arabia and other oil producers have enough spare production capacity to meet any possible disruption to world oil supply that could be caused by Y2K-related problems, AFP reported Saudi oil minister Ali Naimi as saying Thursday. "There is now spare production capacity estimated at 6-mil b/d, half of which is in Saudi Arabia," AFP reported the minister as saying in a report by the Saudi Press Agency. "This spare capacity represents eight percent of global demand, it is an important factor to guard against an unexpected break in supply and any increase in the volume of demand," Naimi said. Saudi Arabia, Mexico and Venezuela said in late November they would act jointly to ensure that any problems relating to the Y2K issue would not disrupt the supply of crude to world oil markets. --Platt's Global Alert-- [0369] [GE] [N] [QQ]

Like I said, it warms my heart to see our Saudi brethern so willing to provide oil if there's a crisis. God bless them.



-- Gordon (g_gecko_69@hotmail.com), December 09, 1999

Answers

Thanks for your work Gordon...---...

-- Les (yoyo@tolate.com), December 09, 1999.

As good capitalists we should probably reward them very generously for their humanitarian oil for money deal. Those SUV's and super SUV's are going to look mighty stupid as a paperweight when gas goes to 3 dollars + when you can get it.

By the way Gordon do you know of any mutual fund that is more of a direct play on oil and less on oil production? Is there such an animal? The question is how to play oil in a IRA type account?

Keep the information coming. KUDO's!!!!

-- Squid (Itsdark@down.here), December 09, 1999.


Gordo,

My compliments. You've done a good job calling recent trends & I concur with this gist of your post here.

I'm expecting somekind of monkey wrench curve ball in the next 2 weeks. How about Saddam rejecting even the 6 month oil for food deal? He's gonna want the millenium spotlight. Remember the Reuters article from 2 weeks ago quoting one of his key oil ministers saying they haven't done anything for y2k - "Consulting is expensive and we can FOF"... And how they gonna import new embeddeds, computer systems and electronics with the 9 year embargo? How much can they pump and export on analog and manual? I dont know. Anybody have any ideas?

-- Downstreamer (downstream@bigfoot.com), December 09, 1999.


Bravo Gordon.

-- snooze button (alarmclock_2000@yahoo.com), December 09, 1999.

I think you are right on the mark Gordon. Thanks for all your efforts on keeping us up-dated on the oil/energy field. It is my sincere opinion that this(above all else) will determine the extent(and duration) of our problems over y2k. Good luck to you and yours on the other side.

-- jeanne (jeanne@hurry.now), December 09, 1999.


If he thinks $27 is high...just wait a couple of weeks!

-- Mad Monk (madmonk@hawaiian.net), December 09, 1999.

Hey Streamer

Now that you mention it, it crossed my mind today that our beloved sand weasle is probably fixing shit right now with the money he made on futures.

I'll bet he's figuring, hell if I'm gonna be down a while anyway, why not hose the Americans in the process. Sort of a bonus for the killer of women children and family members. He is a true reminder that there is evil in the world.

-- Gordon (g_gecko_69@hotmail.com), December 09, 1999.


Bless you Gordon, been following you since North referred to you back in spring during embeddeds threads. That was the defining wake up call to SERIOUSLY prep. Excellent analysis as usual. This forum will save some lives as a result. Keep up the great work as long as possible. Good luck to you.

-- Homecanner (tomatoes@mygarden.com), December 10, 1999.

Gordo

Excellent work once again in covering the issue of oil and Y2K from the market perspective.

TO ALL,

Notice something else that Gordon's news stories are quietly confirming?

OIL IS THE KEY TO RATING THE Y2K IMPACT.

How so?

Look at the Reuters excerpts...

"If not fixed by software programmers, the millennium bug has the potential of crashing computers that help control oil tankers, pipelines, refineries and other industry operations."

Now, that is not a Doomer posting from someone here at TB2000. That is from the Reuters Newswire. And how about this little snippet from the Reuters story...

"Naimi told reporters after meeting with Richardson that he believed the U.S. oil reserve would only be tapped for major emergencies -- such as Y2K disruptions..."

Such as Y2K disruptions... NOW ... IF... IF... IF... oil industry software has been fully remediated on their mainframes and PCs...what other possible problems could there be with oil???? OH NO... It couldn't be ... E-M-B-E-D-D-E-D S-Y-S-T-EM-S could it?????? Hhhhhmmmmmm ???????????????? Oh surely not. After all, Factfinder, The Engineer, Hoffmeister and others have told us that embedded systems are NO BIG PROBLEM, right? Somebody needs to tell that to the US Dep't of Energy. Factfinder, peel off an email to them pronto and straighten them out. Hoffmeister, get on the stick for a change and save the country...sell them that SAP crap of yours.... Engineer, contact the White House and tell Bill you'll volunteer to go fix the half dozen or so chips that might have been missed in the oil industry.

BUT WWWWWAAAAAAIIIIIIIIITTTTTT a second... there's more from Reuters on this.

"Richardson said he had already discussed with his counterparts from Mexico and Venezuela what actions could be taken if world oil supplies were abruptly curtailed at the end of the month because of malfunctioning computers. "We are developing a communications plan to keep us in concert up to, during, and after the rollover in addition to each of our contingency plans in the event that there is an oil supply disruption somewhere," Richardson added, referring to similar plans by Mexico and Venezuela."

The Feds are (not so discreetly) confirming my earlier contentions that I gave out 6 months ago when NOBODY else was paying much attention to the Oil industry. It was just myself and Bruce Beach that were really paying any attention (that I noted anyway). [If there were others, please mention them, I don't mean to slight anyone.] Since then, I've been slandered and slimed repeatedly by the Pollies and the Trolls. Specifically, Factfinder attempted to do a nice hatchet job on the truth. It didn't work. Truth is truth. And there are better men than he out there who have the facts and know what is really going on.

Obviously these "real" experts have now fully briefed the Feds on the realities that exist now in the Oil industry. It must have hit them like a ton of bricks. Still, Factfinder and his Polly buddies persist in preserving the Polly Myths about embeddeds. Of course, I've not seen FactFinder commenting on this latest oil news nor did I catch him commenting on the Koskinen Memo, the NIST/Century Report, Mr. CEO, Nor has he been able to refute Dr. Paula Gordon's embeddeds experts. I wonder why? ALL THESE STORIES point to the facts that the embeddeds problems are a whole lot more than what Factfinder labels as the "myths" of embedded systems.

The REALITY is... embeddeds are at the least, a very serious problem for the oil industry and the Feds now recognize this and are taking it very seriously. This is a fact that cannot be disputed, not even by FactFinder.

I'll have more to say on the entire oil situation soon.

-- R.C. (racambab@mailcity.com), December 10, 1999.


Excellent Work Gordon and R.C.

This is a very important post from Gold-Eagle... FWIW Harry Scultz is predicting $50 by the end of December and a further 75-100% in the new year...

"Y2K, Oil & Bill Richardson (GOLDFINGER) Dec 09, 17:16 Forum,

Bill Richardson should be concerned about rising crude prices, but in reality there will be very little the U.S. can do to influence oil prices. The past 30 years have demonstrated this time and time again.

Here are some points to consider: Bear in mind I have been working as a Senior Petroleum Engineering Consultant in South America for the past 3 year (mostly in Venezuela and Colombia.....currently with one of the largest multi-nationals in the world), and previous to that I worked in the Persian Gulf.

1. First of all, I am very much inclined to agree with Harry Schultz's article from yesterday regarding his prediction that crude oil could doubled in price very soon (he is predicting possibly $50/bbl by Dec. 31st and $75 to $100 early in 2000). I think the following scenario will un-fold:.

a. Y2K creates oil shock.

b. stock market collapses due to oil shock....similiar to 1973/74 scenario.

c. precious metal prices go ballastic in reaction to collapsing stock markets.

2. Venezuela is by far the single largest supplier of crude oil imports to the U.S. Having worked there recently I observed the following;

a. majority of the wells require artificial lift. There are literally 10s of thousands of wells producing via gas lift and electric submersible pumps. Power outages are frequent at the best of times in Venezuela.

b. the words "equipment maintainence" are virtually non-existent in Venezuela.

c. Venezuela was 100% non Y2K compliant in March of this year, now they claim to be 100% Y2K compliant. I don't believe them for one moment! To my knowledge, they have done nothing in regards to Y2K testing.

d. Venezuela is severely cash-strapped. The government can barely pay it's workers.....so how can they check for Y2K compliance.

e. Because of artificial lift requirements (i.e. electrical power requirements) and lower well production rates I think the logistical infastructure is much more complicated, thus more vunerable, to Y2K than in many other producing nations around the globe.

3. The basket price for Venezuelan Crude (heavy oil) is considerally cheaper than West Texas Intermediate, Brent or Saudi light crudes. The U.S. has a cheap sources of crude, which they up-grade in U.S. domestic refineries for commercial purposes. I believe the real motive of Richardson to "drive down" energy prices is to conceal that inflation is here, and Y2K problems and a cold winter will exasperate the problem.

4. The Oil Company I am currently working with are anticipating problems (in their oversea operation in particular). To the best of my knowledge, they have conducted little if any Y2K testing. I am under the impression they shall fix the problems as they come up. So let me ask you all this: If a major multi-national company has spent minimal money on Y2K testing, what would you think cash strapped National Oil Companies have spent..........nothing!

5. On November 30th, 1999, the International Energy Agency (as reported by Reuters) has drawn up plans for global rationing of oil production.

6. The Middle Eastern producing countries export very little crude to the U.S. They could care less what the U.S. thinks, unless of course a problem were to spring up that would shut-off their taps (which would take another war). Some how I doubt that shall happen in the next 3 months.

Sorry Mr. Richardson, but unlike your buddies being able to manipulate the POG down they will not be able to do the same with the price of crude. Middle Eastern countries are wise enough not to trust the West. Historically, OPEC has only intervened in collapsing oil prices, not rising prices. Unlike the past when Middle Eastern producers were awash in petro-dollars, they now have debts to pay........Gulf War for example.

It is my understanding OPEC will not meet again until March 2000. I believe OPEC has stalled and will continue to stall their meetings due to Y2K concerns. OPEC is very much a re-active as opposed to pro- active organization. A collapsing stock market, thus a collapsing dollar would be in their interest so as to monitize U.S. dollar debts (similiar to what the U.S. did to Japan in the early '80s). As the dollar collapses relative to the Euro, producers can agree to be paid in Euros.

Saudi's Maaden purchasing the other half of Boliden Gold Mining Company (just before Y2K) is a tip-off (in my opinion) this game is coming to a conclusion."

-- Andy (2000EOD@prodigy.net), December 10, 1999.



Andy,

Where the heck have you been???

-- d----- (dciinc@aol.com), December 10, 1999.


Oh Shit.......the Clintons' have done it again - screwed up the long-term strategic priorities of the country with their efforts to remain up in their short-term popularity polls.

---...---...---

The Strategic reserves are reserves in the true sense of the word, some set aside as long ago as the 1920's, more during the oil crisis in the 70's - to supply the military needs during a war WHEN THERE ARE NO OTHER SOURCES from overseas.

This they can do for little while, if strict civilian rationing and emergency measures are kept.

They are NOT capable of supplying the US civilian economy with enough oil to reduce international prices and keep people driving their cars - especially if production internationally drops by even 2-3%. Again, he's destroying the long-term military to preserve an image of normalcy they desperately to keep.

-- Robert A. Cook, PE (Marietta, GA) (cook.r@csaatl.com), December 10, 1999.


Err, Robert, not to get into "political" discussions here, but I do believe it was a Republican, Bush, that made the only us of the SPR; and it was not for military use, but to stabilize the "civilian" markets.

-- Hoffmeister (hoff_meister@my-deja.com), December 10, 1999.

That didn't make it right at that time either, only convenient.

Bush made some significant blunders, but no deliberate decisions to sell secrets, to "aid and comfort the enemy," etc. This decision - more important, this attitude is the real fault.

-- Robert A. Cook, PE (Marietta, GA) (cook.r@csaatl.com), December 10, 1999.


OK all you oil guys. I have come around that the oil crisis will be at least as bad as the electrical problems - remember all those petroleum fueled power plants.

If we lose the 40% of our petroleum (what is imported), how do you think rationing will work? Will there be any at all for private use? My best guess would be that the gov will nationalize all the gas companies including the refineries, pipelines, delivery systems to keep the food trucks moving to the cities. This will involve basically shutting down the interstates to keep them clear so that will involve martial law.

Now, business will have to be kept operating on some level to prevent total anarchy. How do you suppose they will determine who gets to ride the bus to work which jobs? Do you suppose there is a plan somewhere in the great unknown reaches of .gov for this scenerio or are they just now thinking about - oh gee - maybe we need to plan for this?

And last, what would be your best take on how long it will be until we are back up to say a 70% level of our current supply - especially if the supply were to drop to 40% of current level as mentioned in previous threads on oil? Any guesstimates? I'd say economic calamity is a given at even a 20% loss of current levels.

-- Valkyrie (anon@please.xnet), December 10, 1999.



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