I'm online right now and will field some questions. Try to keep them oil related. I'm a crude oil analyst and will do my best to answer your questions.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000

Answers

Hi Gordon, what percentage of well, pipeline and refinery problems that have surfaced to date this year are y2k related. I realize this will be an educated guess.

Thanks for your thoughts.

Ray

-- Ray (ray@totacc.com), January 22, 2000.

How bad will it get in the next few months ?
Since my '87 Hyundai gets 30 mpg - I think it will be worth a lot more soon... Dan

-- Dan G (thepcguru@hotmail.com), January 22, 2000.

Gordon: Thanks.

What, in your opinion, will be the major influences determining the price/availability of crude oil over the next few months - i.e. what things are 'big rocks' and what things are 'little rocks'.

Another way of saying this is: what factors will you be watching closely in the immediate future? What, if any, factors do you consider insignificant (e.g.. should Iraq be watched closely or basically ignored)?

No need to get terribly elaborate - because I'm certainly no expert on oil/oil markets but I am watching the current situation with interest.

-- Arnie Rimmer (Arnie_Rimmer@usa.net), January 22, 2000.

As far as what percentage, I couldn't field a guess. I think the Saud contact was correct when they said it would be Feb before we know exactly how much supply has been interrupted. I don't think we've seen much domestic crude interruption at all. I don't share the same confidence regarding international supply. If futures continue to rise at the pace they have, I think it will be safe to say that there has been some signifigant interruption of supply. If we get to 35 bucks or so on Nymex WTI.

I think cars that get good mileage will be valuable to you as a consumer.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Would you suggest that I buy my hotdogs at Texaco's Star Mart or Amoco's Food Mart?

-- Butt Nugget (catsbutt@umailme.com), January 22, 2000.

Arnie: The biggest rock of course would be supply disruption due to techincal difficulties. As far as I'm concerned, the jury's still out on this one. Areas to watch closely for signs will be the mid east, ven and north sea. I would watch for signs like the one I saw this week about the Saud's doing some hankypanky with Treasuries to cover debt financing.

The second biggest factor is the geopolitical process right now. I think OPEC and to a large extent, the world, have figured out that we've been exporting our inflation at their expense. This worries me a great deal.

All moves by OPEC should be watched closely, G7 meeting this weekend, currency movements (esp Yen/Dollar), Iraq definitely one to watch. Also, Iran, I'd like to know how many boats are still off Kahrg Island at this time.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Nugget: Would you suggest that I buy my hotdogs at Texaco's Star Mart or Amoco's Food Mart?

Hmm, that's a tough one. They're both made of lips and assholes, and since you're long on both, I'd say skip them altogether.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Thanks Gordon

If oil is $30 a barrell now and I'm paying say 1.50 at the pump---

Does that mean if oil doubles and goes to say 60 a barrell that I'll be paying 3.00 a gal.?

Loved ya in Wall Street!

-- Johnny (jljtm@bellsouth.net), January 22, 2000.

The media is blaming the current shortage on an "announcement" by opec of curbs in production ,how does announcement = shortage.they are also blaming the cold on the shortage,but I never remember any cold weather causing shortages so rapidly.What is your take on the cause of the current shortage??Up until about a week ago this was a very mild winter.Thank you for your input.

-- J (jax@borg.com), January 22, 2000.

What's your outlook for propane? Price and availability. I read the article in the Houston chronicle that says there may be "spot" shortages by a few months from now.

I just had my small pickup converted so it runs on gasoline or propane. Does propane require more refining processes than gasoline?

-- jeanne (jeanne@hurry.now), January 22, 2000.

Gordon

Good to hear from you. Could you explain to the forum the issues of new versus old oil wells in the US and the time window for developing a field all over again after the wells have been killed. I think this will help some of the forum understand better the vulnerabilities from JIT in the oil industry. Further, a discussion of Federal Regulation and the role it has played in undermining US oil security in regards to domestic production will liven things up a bit. Thanks for all your postings and import.

PS. Not much from old contacts in Kingdom. The saying over there was you arrive to work with two buckets. One is for money and one is for BS. When either one gets full you leave. I am afraid that many of my old friends have either left happy or frustrated. A couple still remain and I will try to track them down.

-- PA Engineer (PA Engineer@longtimelurker.com), January 22, 2000.

Hello Gordon,

I've come into the office this afternoon to continue compiling old information from the Bloomberg terminal's data base on refinery shut downs. This is a new field for my so I have some questions about the data.

1. Some of the reports on the wires are confirmed by the company involved. Others are not confirmed, but come from "traders." The unconfirmed reports do not seem that wild, they never vary over time. So are they nearly as credible? There have been a cuople of cases in which unconfirmed reports in the past claim a particular refinery is shut down or at reduced capacity, but it was never followed by a report that the refinery is back at full production. Should I assume that those reports were wrong?

2) Most of the reports list output by barrels per day. Ocassionally, it is reported by tons per year. How can I convert the second measure to barrels / day?

I have other Q's that slip my mind right now. I'll get back to you when they come up.

Thanks.

-- Jay Golter (JGolter@aol.com), January 22, 2000.

Hi Gordon - I would like explained the contamination event we are seeing in Australia.

1. How did the contamination really happen? 2. Is it feasible that this could happen elsewhere 3. How did they not 'find' this problem before it got into aircraft?

There are lots of questions here, sorry, but I just don't quite understand how something this important was not found. Thank you for the opportunity to ask.

-- Sammie (sammiex0@yahoo.com), January 22, 2000.

If oil is $30 a barrell now and I'm paying say 1.50 at the pump---

Does that mean if oil doubles and goes to say 60 a barrell that I'll be paying 3.00 a gal.?

Answr: Not necessarily. However if crude goes to 60 bucks per barrel, our economy will collapse. That's not an if, that's a will. It was interesting to see all of the big wall street guys this week talking oil. It's got them nervous because they know it could pop the bubble in a hurry if we get up there and stay up there. Despite what the "new economy" dorks say, the oldtimers know what high oil does to inflation. It ain't good.

In answer to your question, the relationship between crude oil and gasoline prices is a complex one to say the least. It has been studied add infinitum and various pundits have different feelings on it. To simplify it a little, that is to throw out the different channels of trade and time to market differentials, I would say the following:

As crude oil goes up, gasoline prices correspondingly rise. They don't always rise or drop proportionate to the crude price in lockstep. Instead, they are affected by supply, demand and distribution factors.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Gordon;

I just posted an article on the Energy Agency predicting possible shortages in the spot oil market by summer. Question, will statements like this inflame the crude oil market and drive prices up quickly or will it take untill summer for the crude price to go up (and then gas prices)?

-- Helium (HeliumAvid@yahoo.com), January 22, 2000.

Gordon,

One of my cars is a '84 Buick Century (3.2 litre 6 cylinder). Which grade of oil would you suggest I use?

-- Butt Nugget (catsbutt@umailme.com), January 22, 2000.

The media is blaming the current shortage on an "announcement" by opec of curbs in production ,how does announcement = shortage.they are also blaming the cold on the shortage,but I never remember any cold weather causing shortages so rapidly.What is your take on the cause of the current shortage??Up until about a week ago this was a very mild winter.Thank you for your input.

Answer: I would agree that there is some obfuscation going on in regard to the supply demand balance out of OPEC. However, the one thing I'm certain of is that there is a supply demand imbalance that has been continuing for almost a year and a half. In other words, two years ago, OPEC was swimming in crude oil. So were we. Oil prices were at twenty year lows. Reporting is a very "in the moment thing" these days and tends to miss out on longer term analysis or simply omit it to make a better byline.

Two years ago, OPEC began cutting production for real. As the im- balance began to eat away at the overhang, we began to see a trend emerge, however most ignored the fact that the trend was destroying the overhang. In other words OPEC began draining the pool two years ago and no one noticed because they were to busy putting on suntan lotion at poolside enjoying the sunny weather. Oops! It was easy though because it was so nice out and we still had excess. However, had we known that the pool was going dry we might have tried to get some water from another source. Unfortunately the Clinton admin didn't realize the strategic importance of crude oil and is now in the process of picking itself up off the pool floor and shaking it's head from the concussion.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

What's your outlook for propane? Price and availability. I read the article in the Houston chronicle that says there may be "spot" shortages by a few months from now. I just had my small pickup converted so it runs on gasoline or propane. Does propane require more refining processes than gasoline?

-- jeanne (jeanne@hurry.now), January 22, 2000.

Answr: I'm not that familiar with propane and how it's made. I did however speak with a friend of mine who is a propane trader this week. He told me that propane is extremely tight. Much propane comes to the US from Canadian companies and apparantly they are having trouble getting it down on rail cars. This is causing a big old spike in propane prices in the USofA. If you saw this weeks API stats they confirmed a bigass draw on the prope. Ruh roh raggy! (old scooby doo fan here)

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

1. Some of the reports on the wires are confirmed by the company involved. Others are not confirmed, but come from "traders." The unconfirmed reports do not seem that wild, they never vary over time. So are they nearly as credible? There have been a cuople of cases in which unconfirmed reports in the past claim a particular refinery is shut down or at reduced capacity, but it was never followed by a report that the refinery is back at full production. Should I assume that those reports were wrong?

Answr: Rumors from traders usually are somewhat believable. I know I'm hedging here, but let me explain. In our business we buy rumor and sell fact while making every effort to confirm the contents of the rumor. Refineries are so complex that they actually add to this process by being inherently difficult to diagnose on a spot basis. However by the time a rumor hits "the wires (newswires Platts etc) we usually know if it's real or not. We may not know the extent, but we know that we've seen so and so buying up gas in the market ona spot basis, so they must be screwed on gas etc...In other words it's a lot like poker. Each player has "tells" you just have to know what they are and catch them in time to profit from it.

2) Most of the reports list output by barrels per day. Ocassionally, it is reported by tons per year. How can I convert the second measure to barrels / day?

use about 7.69 to convert from metric tonnes to bbls. the calculation actually depends on the specific gravity of the crude etc. but you can do balparks with that number.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Thanks for all your help Gordo. Was there any truth to the rumor that the Saudis lost 75% capacity? There was also speculation in December, that they didn`t do jack in the way of remediation. I should think that their mainframes will also be a problem.

-- Earl (earl.shuholm@worldnet.att.net), January 22, 2000.

Good to hear from you. Could you explain to the forum the issues of new versus old oil wells in the US and the time window for developing a field all over again after the wells have been killed. I think this will help some of the forum understand better the vulnerabilities from JIT in the oil industry. Further, a discussion of Federal Regulation and the role it has played in undermining US oil security in regards to domestic production will liven things up a bit. Thanks for all your postings and import.

Answr: Taking a well down is not always a simple affair. Many of our domestic wells use a process of steam injection to pump the crude out. Starting and stopping it is not always posibble or economically feasible. In other words, it make take so much time and steam to restart that you loose the well in the process.

In the last two years tremendous strides have been made in finding new production. In many cases this production is under water, ie: Gulf of Mexico. The "hit" ratio has gone up considerably. Whereas it used to be immensely difficult to find the oil, it has become easier thereby creating new opportunities. The things to watch on this front are the "rig count reports" you must watch the new rigs as well as the old ones that are dropping off, in other words abandonments.

This will give you an idea of how things are really going. For example, if you'd watched the canadian industry starting two years ago you would have seen big declines in new rigs along with an increase in abandonments which should have told us that supply was shrinking fast.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Gordon; I just posted an article on the Energy Agency predicting possible shortages in the spot oil market by summer. Question, will statements like this inflame the crude oil market and drive prices up quickly or will it take untill summer for the crude price to go up (and then gas prices)?

Short answer yes it will. I would posit right now that I think we're gonna see some very high gas prices this summer. What happens in the oil bus is that we get whipsawed by supply demand problems which tend to keep sawing until they reach equilibrium and we swing the other way. The reason I say this is that the current shortage will cause refiners to delay switching to producing more gasoline at the expense of distillates. They therefore will not build as much gasoline inventory as they normally would. This will translate into a tighter supply picture in the spring and early summer. Add in a longer winter and the prices will go higher. Add in tight OPEC and they will go still higher. Add in dirty power problems and they will go still higher. I am hereby on record as saying i think we'll have a "high gas price summer" if the supply picture plays out thusly.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

My (northeast) state's governor ordered all oil barges to be kept offshore over the year end rollover. Could this have anything to do with the present tight supplies?

-- nancy (nallen@acadia.net), January 22, 2000.

Hi Gordon - I would like explained the contamination event we are seeing in Australia. 1. How did the contamination really happen? 2. Is it feasible that this could happen elsewhere 3. How did they not 'find' this problem before it got into aircraft?

ANswr: I'm not sure what they did wrong on the refining end of this. Clearly their was a major screw-up. The bigger question would be how did so much of the fuel go out off spec? From time to time, refineries have burps that produce such problems. Usually, the refinery is quite rigorous in testing at all phases of production and transport of said fuel to ensure that it is on-spec (specifications) product. In this case they blew it. I'm not sure why, but it doesn't matter what I think, those guys are in a pile of shit. I went to the website and read up on it. That fuel problem has probably destroyed quite a few engines by now. A bad situation all around.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Gordon

Thanks.

-- PA Engineer (PA Engineer@longtimelurker.com), January 22, 2000.

Thankyou for taking the time to answer these questions Gordon:

What is the relationship between gold and oil? In anticipation of inflation due to oil spikes would precious metals be a good investment now?

Thanks, newhere

-- NewHere (new@mindspring.com), January 22, 2000.

Thanks for all your help Gordo. Was there any truth to the rumor that the Saudis lost 75% capacity? There was also speculation in December, that they didn`t do jack in the way of remediation. I should think that their mainframes will also be a problem.

If they had lost 75% capacity we'd already be at 50 dollar crude oil by now. I don't think this has happened. Now did they lose 20% or 30% or any? Right now your guess is as good as mine. I think the price will continue to tell us what we need to know, barring govt. intervention. I have to think BIlly and BIlly are pretty desparate right now. The SPR story will probably run again this week. Bush is probably in Kuwait to jawbone the Kuwaitis to lobby OPEC for us. Failed foreign policies can be detrimental to superpower economies.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Thank you gordon for taking time to answer questions today!

-- Helium (HeliumAvid@yahoo.com), January 22, 2000.

My (northeast) state's governor ordered all oil barges to be kept offshore over the year end rollover. Could this have anything to do with the present tight supplies?

Answer: I think the little break in the JIT flow did in fact affect some tightening on the overall product supply system. It had to quite frankly, because we stopped everything for about 8 hours. That's a subtraction of one day's product which must either be made up with extra deliveries or lost.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

What is the relationship between gold and oil? In anticipation of inflation due to oil spikes would precious metals be a good investment now?

Answr: I'm not a metals analyst and I only follow gold as an inflationary indicator. Due to the manipulation of the gold markets in recent months I feel they've lost a bit of thier ability to indicate on a PUBLIC basis. I think the fact that they've been so HEAVILY manipulated is an indication of the fear of inflation. I am interested to see the funds buying the hell out of metals this week. They bought a lot of aluminum etc. This is bullish for all metals and commods in general.

I'm not your guy for gold advice though.

-- Gordon (g_gecko_69@htomail.com), January 22, 2000.

All for now.

If you post more questions I'll try to answer them later tonight.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

How would high oil prices ($60.00/bbl) effect our economy? You stated that our economy would suffer. Please explain. Thank you.

-- Driller's Wife (notsure@whatoknow.com), January 22, 2000.

No question, just an observation.

I was out this am and happened to glance over at a filling station. Arco Diesel is going for $1.51.9!!!

uh...for diesel? With an Arco refinery only a few miles away?

The diesel was actually higher than the Supreme by .02".

Things are very strange and these are interesting times.

Mike

=====================================================================

-- Mike Taylor (mtdesign3@aol.com), January 22, 2000.

Hi Gordon. Any word on the Russians: crude, natural gas, coal and also if possible strategic minerals.

-- snooze button (alarmclock_2000@yahoo.com), January 22, 2000.

Driller's Wife asked,

"How would high oil prices ($60.00/bbl) effect our economy?"

I think we would be looking at hyperinflation beyond anything the world has ever seen. Every product or service is tied to oil in some way.

However, and yep I'm speculating, if oil were to reach these levels then I can't see how we would not be in some kind of world war in a struggle to control and have access, etc. Oil at $60.00 would be a very dire situation, IMHO.

Mike

===================================================================

-- Mike Taylor (mtdesign3@aol.com), January 22, 2000.

Gordon - FYI now the Canadian sector is really looking at buying new drilling rigs - a friend is a mgr for a LARGE drilling rig building co. here in Alberta and they are run off their feet trying to keep up production.

Do you think that if Irq has big production/shipping problems, we might see a "wag the dog" (speaking of weiners) scenario play out here with a small war being the distraction and the excuse (again)?

-- Laurane (familyties@rttinc.com), January 22, 2000.

Gordon-- How much money have you made off your analyses over the past two years?

What is the best current oil-related play financially?

Do you work for a company or generate enough income based on your own skills to not require a paid job?

-- ImSo (happy@prepped.com), January 22, 2000.

Gordon -- Thanks for all your input on the oil thing.
A marginally related question: Why is gasoline so much more expensive in the Los Angeles area (with several major local refineries) compared with, say, eastern Oregon, where there is nothing (that I know of). Is it just the taxes and regs and real estate prices, or are there other factors?

Related question: How are you playing this? Futures? Are there options? What would would be contract months for futures? Contract months and strike prices for options? In futures (and options?) is there enough trading and open interest to get good fills on buy and sell trading orders?

-- A (A@AisA.com), January 22, 2000.

I mean, what contract months would you/are you playing, and why? Thanks.

-- A (A@AisA.com), January 22, 2000.

Gordon,

What do you think the likelyhood is of us going in and TAKING oil via military intervention? After all, we've gone to war over far less...

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), January 22, 2000.

Thanks for all your posts. Without getting into an ecomomic discussion, I would like get a better "feel" for your position regarding the bubble and the pin. If oil is the pin, then at what price would the pin contact the bubble?

Earlier you said $60 oil but could $40 oil do it. I know - just an opinion and that is all I ask. I'm trying to get a read on the people that you deal with on a daily basis. From your vantage point, when do you think that you will see the "fear" in their eyes?

Is this becoming a crisis, already a crisis, or past that point?

Thanks.

-- Mike Lang (webflier@erols.com), January 22, 2000.

Mike Lang has asked a good question. I`ll be happy to see the answer. Thanks Gordo, from all of us, for your freely given introspection.

-- Earl (earl.shuholm@worldnet.att.net), January 22, 2000.

Hi Gordon,

Can you comment on these two - apologies for the length of the second question...

1. I would like your "crude anlysis" of Maria Bartiromo ... last week she was trashing Oil Stocks on bubble.vision for her paymasters, do you forgive her, and if not, who is next best on bub.vis to play spot the salami with at lunchtime?

2. I think I was one of the first to predict oil problems, way before roll over, mainly because the supply line from the oil deposits to the consumer is so long, with so many error/breakdown points en route. OPEC have steadfastly agreed to curtail production to September 2000. It is my hunch that they are working this adverse y2k- induced shortfall situation to their advantage, in other words being the masterful negotiators that Arabs are, they are sticking it to the USA whilst their own facilities are being fixed. Two birds with one stone. Also they are preserving their valuable and finite resource, ensuring it lasts longer, and reaping permanently higher prices - I believe this is a first move in pricing Oil in Euros in the near term. A warning shot to the USA to clean up their act, conserve energy like the Europeans and deflate Wall Street - or else. Any comments on this?

P.S.

Rumours of some National Guard personnel going to Venezuela... will the tanks be next "to help rebuild" when oil hits $75+ ?

-- Andy (2000EOD@prodigy.net), January 22, 2000.

Gordon,

I've appreciated your comments over the past number of months.

I've collected a table of "incidents" resulting in closure or lowered production at refineries and other petroleum processing facilities. However, with no benchmark to compare it to, while it looks mighty unusual to me, I can't say for sure. Would you take a look at the table and give us your gut feel as to whether the percent of outages is far higher than normal? Table is at http://www.nckodokan.com/charts/crude.html

Thanks marc1a peters

-- marc1a (marcia@nckodokan.com), January 22, 2000.

Gordon,

What are your credentials, other than analysing oil? I've been analysing various aspects of the economy all my life. I can't believe how these people get suckered in by you puffed up blowhards.

Remember c4i? What ever happened to him/it/her/them?

You are probably a Michael Douglas wannabe.

-- (Show@meYour.credentials), January 22, 2000.

Gordon, Good debunk of the Saudi 75% production cut falsehood.

Regards,

-- FactFinder (FactFinder@bzn.com), January 22, 2000.

Gordon, I received a call today from my oil company. In his exact words, "it's out of control". He said his company tried to purchase fuel on Long Island, all tanks are empty. Finally got some home heating fuel, for 1.76/gal. Wants me to contact my congressman to open the strategic reserves. Any insight into WHAT'S GOING ON?!

-- sky (thinksky@sky.com), January 22, 2000.

The price of gas has gone down 7-10 cents a gallon here in Seattle.

-- Cherri (sams@brigadoon.com), January 22, 2000.

Love to see the Polly/Trolls squirm and wiggle as the y2k ax begins to fall. These folks will be on the ropes in the next 2 months!! Get ready for some totally bizarre stuff from these weasels!!

Gordon, thanks for taking time out to educate me on the oil situation.

Ray

-- Ray (ray@totacc.com), January 22, 2000.

Gordon,

You mentioned the Iranian ships (Karg Island), and some time ago you noted that the Saudi's were also taking long term leases that would let them store the crude for a while.

It would seem to be impossible to keep this number of ships (and their whereabouts) a secret. Is there any information on what is happening to them?

-- rocky (rknolls@no.spam), January 22, 2000.

another lie, Cherri?

-- (-@-.-), January 22, 2000.

Ray, we've all heard that doom and gloom story for quite some time now. Where are the bank runs? Power's on here. And the phone works. Food stacked to the ceilings at Sams, and other grocery stores.

This really is better than television.

Ray, if you look real hard, maybe you can see some chemtrails with flying saucers attached. Have run rubbing your two gold coins together.

-- (Gomer@gecko.com), January 22, 2000.

Gordon:

Seriously now, I've been pondering your surname for months. Why is your family name the same as the gecko lizard, described by Webster's dictionary as "any of numerous small harmless chiefly tropical and nocturnal insectivorous lizards (family Gekkonidae)"?

Just curious. I mean, Helmut Kohl has an interesting surname, which can be translated into English as "cabbage". It's like, "Hello, Mister Cabbage." Sounds kinda funny. But maybe I'm making a foolish assumption here...

Jedenfalls, keep up the excellent reporting, Gordon.

-- dinosaur (dinosaur@williams-net.com), January 22, 2000.

Gomer, your intelligence or lack thereof is quite apparent here. Please take a minute out by starting at the top of this thread and attempting to educate yourself !!

Let Gordon know if you have any serious questions.

Ray

-- Ray (ray@totacc.com), January 22, 2000.

"How would high oil prices ($60.00/bbl) effect our economy?" --Driller's Wife

Here's an interesting article in Philly's Inquirer today attempting to answer this question:

Economy shrugs off spiraling oil prices

Prices are at a nine-year high, but analysts say our high-tech economy has lessened the impact.
By Dave Carpenter ASSOCIATED PRESS

As crude-oil prices roared toward $30 a barrel this week, reaching levels last seen on the brink of the Persian Gulf War, airlines were adding surcharges to ticket prices and consumers were worrying about heating bills.

Yet inflation remains tame and the U.S. economy has barely blinked.

The reason: Oil simply does not lubricate the new, tech-savvy economy the way it once did.

"Oil's overall impact on the economy is vastly reduced" from years past, said William Cheney, chief economist for John Hancock Financial Services. "That's due to the increased energy efficiency of companies that use oil heavily and the increased importance of industries that are not heavily dependent on it."

Prices for crude have jumped nearly $5 a barrel in the last week. Heating oil, spurred not only by oil's surge but also by a Northeastern cold snap, has risen 50 percent in two weeks.

[sniped part about airlines surcharge increase]

But even with energy products pushing to a series of nine-year highs, many Americans keep shelling out, undaunted, for gasoline and other petroleum products.

"It doesn't deter me," Chip Tuttle said at a Boston gas station yesterday as he paid $43 to fill his sport-utility vehicle's tank. "The economy is good.",

The era of cheap oil started to close last March when the Organization of Petroleum Exporting Countries cut production by 4.3 million barrels a day. The oil producers were determined to end a world glut and push up prices that had fallen as low as $11.37 a barrel in February.

U.S. oil supplies are at their lowest level in several years, and the International Energy Agency warned Thursday that markets "are tight and getting tighter."

Since March, crude-oil prices have more than doubled, reaching a nine-year high in November that was smashed again this week. Oil for February delivery rose as high as $29.95 during trading Thursday before the contract expired. In trading yesterday, the March contract briefly rose above $29 before giving up some ground. The new near-term contract still managed to finish the day with a gain of 23 cents to close at $28.20 a barrel on the New York Mercantile Exchange.

Two decades ago, a similarly huge spike in oil prices caused gas lines and sent the U.S. economy into shock. But in 1999, while fuel oil and gasoline prices climbed sharply, the "core" rate of inflation - excluding the volatile energy and food sectors - rose at its smallest rate in 34 years, just 1.9 percent.

What happened to inflation? Where is the recession?

Some economists are still warning of dire consequences, especially if oil's rise continues unabated. Phil Verleger, economist for the Brattle Group, a consulting firm in Cambridge, Mass., sees oil headed to $40 by year's end, prompting several interest-rate increases and a recession before the year is out.

"If it went to $40 a barrel, it would be disruptive," said Bruce Steinberg, chief economist for Merrill Lynch. "You can't keep going up endlessly without having an effect."

But the United States has built up a much better resistance to energy shocks. The oil-price explosions of the mid- and late-1970s helped spawn a new energy consciousness, and the giant steps taken by technology steered the economy away from manufacturing and toward services and the Internet.

Oil expenditures, which accounted for 8.5 percent of gross domestic product in 1981, have fallen to about 3 percent, according to the U.S. Energy Information Administration.

-- (read@the.paper.today), January 22, 2000.

dinosaur,

My guess is this is this what inspired the moniker, "Gordon Gecko" ...

NEW YORK -- Michael Douglas used to love playing heroes on the screen. Then, he felt the lure of ''the Dark Side.''

It began with Wall Street (1987), where he made the ruthless raider Gordon Gekko and his catch-phrase, ''Greed is good,'' part of the national vocabulary ...

Great movie.

-- Cheryl (Transplant@Oregon.com), January 22, 2000.

"...But the United States has built up a much better resistance to energy shocks. The oil-price explosions of the mid- and late-1970s helped spawn a new energy consciousness, and the giant steps taken by technology steered the economy away from manufacturing and toward services and the Internet."

I'm speechless.

This writer seems to think that manufacturing has little affect on our economy that it will easily absorb the price increases. I wonder if he will feel the same way when he has to start paying increased prices for clothing and shoes (for example). Right now, the US imports many of these items because we have allowed our garment industry to move overseas to take advantage of non-union labor. We rely on inexpensive diesel in order to ship these products back to the US. Extend shoes and clothing to other items -- auto parts, fruits, vegtables -- and I, for one, see a potentially significant economic impact.

-- (FollowingOil@dot.com), January 22, 2000.

Reference read@the.paper.today's quoted comment: "--and the giant steps taken by technology steered the economy away from manufacturing and toward services and the Internet."What a bunch of warm fuzzy feel good spin.

This global economy of ours that transplanted the good manufacturing jobs to a sweatshop country is dearly dependent on energy in that country for manufacturing as well as being transported to our homes. The poor folks here running between their 2 or 3 services jobs need the gas just to get to work. So this wont affect us? If "us" is the folks at the top of the food chain, then that is correct. But if "us" is the folks at the bottom of the food chain, well, we are screwed again.Oh, I get it, with the cost of all this imported manufactured stuff beinig so high we cannot afford it, we are supposed to just sit around playing with the internet and service ourselves.

The drillers wife question was addressed to Gordon, Gordon answered it - so read@the.paper.today you was not asked, so give it a rest.

-- concerned one (servicingmyself@internet.nojob), January 22, 2000.

At Last !!!!!

A useful thread!!!!!

Gordon, Here in California we are at the mercy of the local refineries which (to my understanding) use locally produced oil. January 99 I was paying $1.24. In March '99 I was paying $1.89. Today I am paying $1.49. Any guesses where prices might go next?

-- River Soma (riversoma@aol.com), January 22, 2000.

Hey Gordo, What is your take on the "Special delivery for LAMO" post near the top of this forum?

-- Earl (earl.shuholm@worldnet.att.net), January 22, 2000.

Gordon, Yes, what stock plays?

-- Mara (MaraWayne@aol.com), January 22, 2000.

GEEZ ... I wish it were possible to do a search function on this forum.

In late December I remember reading a news article about oil companies having drawn down their reserves to maximize tax benefits. Can't remember if I saw it here, or the stock/financial forum I participate in. When I saw that ... I was flabbergasted that they would do this, with so many unknowns looming.

I couldn't find the specific article that stuck in my mind - because we don't have that search function. But, this [an article earlier in the month] explains the rationale.

GORDON: Could this drawing down of reserves for year-end tax benefit, coupled with un-anticipated problems ... be the cause of what's going on right now?

====================================================================

[Fair Use: For Educational/Research Purposes Only]

Tuesday December 7, 1999

Oil refiners struggle with Y2K inventories

By Timna Tanners

LOS ANGELES, Dec 7 (Reuters) - Worries about a potential run on gasoline stations just before the New Year have created an odd inventory headache for refiners, which usually draw down stocks at year-end for tax and accounting reasons.

Oil refineries are grappling more than usual with the flip of the calendar over the right level for year-end inventories, torn between keeping normal minimum supplies or boosting reserves to avoid possible Y2K glitches or consumer runs on gasoline.

Typically, refiners reduce oil and gasoline stocks at year-end for tax and accounting-related issues.

Holding large amounts of inventory means companies have cash tied up and might not be operating efficiently. Moreover, this year, inventory costs are especially high as oil prices have doubled from year-ago levels.

But Y2K computer concerns have some refiners defying their accountants and preparing for any last-minute adjustments for failed computers and stockpiling supplies for any consumer panic. Two recent polls showed 28 percent to 40 percent of Americans will fill their gasoline tanks before the New Year.

``It's a Catch 22. All told, they want low end-of-the-year inventories, but they don't want to be the service station on the news with the 'Out of Gas' sign,'' one West Coast products trader said.

Market analysts said refiners appear likely to keep extra oil product stocks close at hand but away from the refinery. They also may be keeping extra stocks in alternative locations like pipeline facilities, and some major oil companies already have made deals to have smaller firms hold stocks temporarily, analysts said.

``Given the choice, they would obviously dump all of their inventories, but forced with the reality of the circumstances, they are tending to carry a little more inventory at the end of the year than they would have planned a year ago,'' analyst Rob Harvan at Honeywell/Bonner & Moore said.

The stockpiling of fuels has been reflected in strong demand and higher prices for oil products on the New York Mercantile Exchange (NYMEX), analysts said. Gasoline futures prices have strengthened more than 7 cents a gallon in the past month to 70.25 cents.

For oil stocks, refiners want to achieve a delicate balance between buying oil before prices rise, as some companies fear they will, and not dipping into a tax accounting convention that keeps year-ago supplies of cheaper crude on the books.

An accounting method used by most firms for tax reporting, called ``Last in, first out'' or LIFO, means companies accumulate ``layers'' of crude oil remaining from past years. That is complicated this year by the fact that oil prices have more than doubled over last year's levels.

If inventory reserves fall below 1999 levels, the company dips into the 1998 layer of oil stocks, which are priced at the average $11-a-barrel market prices at the end of 1998. Since New York oil prices stand at about $26 a barrel now, the company would incur a tax gain on its books.

``People want to keep stocks at a minimum, but don't want to dip into those LIFO layers because with the cheaper oil, they would incur huge taxes,'' Purvin & Gertz senior principal Ken Miller said.

Inventory policy is likely to vary, depending on the refiner and its proximity to sources of oil, analysts said.

Indeed, some refiners said they were sticking with ``business as usual,'' without concerns over potential operation failures due to the Y2K computer bug problem.

``We're not going to be doing anything unusual. Stockpiling oil or gasoline for Y2K does not make economic sense,'' one oil trader said.

URL: http://biz.yahoo.com/rf/991207/62.html

-- Cheryl (Transplant@Oregon.com), January 22, 2000.

Mara look at the charts for "PLUG" and "BLDP". These firms are developing alternate energy sources.

dave

-- dave (wootendave@hotmail.com), January 22, 2000.

Gordon, I've been considering a makeover. I want more of a retro 50's "greaser" look. What type of oil do you suggest I use in my hair?

-- Butt Nugget (catsbutt@umailme.com), January 22, 2000.

Mara,

I don't know anything about BLDP ... but PLUG is being played around these days. The rapid rise in stock price is primarly because of short covering. It's gonna take years for this company to make money. It's a "momentum" play right now.

I suggest that a separate thread be started to discuss investment "opportunities". Let's keep this thread a dicussion re oil with Gordon.

-- Cheryl (Transplant@Oregon.com), January 22, 2000.

BN - KY of course.

-- Andy (2000EOD@prodigy.net), January 22, 2000.

Hi Cheryl,

I remember exactly the thread you are talking about - i posted that I was outraged at the time that Richardson, despite all his peacock preening and blather, was allowing these oil Companies to draw down their reserves for tax reasons. So, in effect, we went into y2k with a shortfall - contrary to what Richardson et al would have you believe now. Amazing, but true. Now look at what's happening.

-- Andy (2000EOD@prodigy.net), January 22, 2000.

Andy,

I'm glad you saw what I saw. I sure wish we could find that article.

I was under the impression that some stockpiling was going on ... UNTIL ... I read that article in late December about maximizing tax benefits by drawing down the reserves. I couldnt' believe it when I saw it.

-- Cheryl (Transplant@Oregon.com), January 22, 2000.

I read it too Cheryl, so it must have been on this forum or Gary North or HumptyDumpty. I don't surf the web like most of you do. Taz

-- Taz (Tassi123@aol.com), January 22, 2000.

No Taz, Cheryl it was here.

It almost makes me thinks this may have been planned to shock the markets, blame it all on OPEC.

-- Andy (2000EOD@prodigy.net), January 22, 2000.

Gordon, I don't believe I've seen this question in your "column":

I'd like to know about what people can/are trying to do to try to keep the price of oil futures down. I heard that there was "an attempt" (by whom, I don't know?) to force the prices down during the last hour of trading yesterday, and it actually "succeeded" in the last 3 minutes of trading to somewhat depress March futures.

So, if you could please explain HOW and WHO might be involved in such manipulations, I'd appreciate it. I can imagine that there are political reasons to keep oil prices down, and interests which want to keep the stock market up would want oil down.

I can imagine that anyone can sell futures, which would compete with those who are buying futures, and could lower the price. But if you were selling futures, and didn't have the oil to cover the contracts, you would be having to buy oil at the going rate to cover your short sales, resulting in a loss. But wouldn't it be worth it to take a loss, if oil is such a keystone for the rest of the bubble.com? If manipulating oil prices downward could keep your other investments stable, it would be worth pouring money into selling short.

Your thoughts?

And thank you for all you've added to the learning process at TB2000.

-- Chuck (cestin@aa.net), January 22, 2000.

I think this is what you are talking about Chuck...

OIL action today and the Plunge Protection Team failure...

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread ---------------------------------------------------------------------- ----------

Oil on Friday

This from the GE site, (noula) Jan 21, 15:14 I don't take too much stock in the price action for crude and distillates today. It is Friday, the only day of the week when the PPT has the market to itself without foreign influence. Ever notice that the greatest stock mkt melt ups take palce of Friday? The TBonds always find a bid on Friday? The $US is always strong on Friday?

The oil/distillate futures markets are trading at substantial discounts to the spot markets. The trading world doesn't believe this move in crude is real. Even if they believe, it is thought to be temporary. Oil production and oil service companies still have yet to move up in a big way. Just let the spot markets keep or extend their gains and maybe, just maybe the futures markets will start to believe the up move is real and start to price these products on a cash and carry basis.

The stockpiles of real commodities are servely depleted and the economy's ability to replace this shortfalls is impared. As a society, we have not paid enough attention to our productive infrastructure now for 20 years. Inflation will rage for years.

BTW, March crude closed up $0.21 to $28.18. The PPT is having a tough time getting the job done. Gold's day is at hand. Turn your monitor off and quit driving yourself crazy! Our time has arrived folks!

WOW-wow!! What a nasty little skirmish that was-

(richard640) Jan 21, 15:13

It looks like the surrogates of the Fed and the Treasury came into the petro market the last hour and tried to break the mkt. They chose a great day-if crude had actually closed down a lot it would have been a sigificant negative technical development. It still may be but I am heartened. It looks like real demand was discovered on this pull back- The smart money that came in and bought did NOT want to wait to see if there would be downside follow through on Monday when they could get it cheaper-[that includes me :o), Andy] we may still be in for a sizeable correction but there may be a chance we will just continue up. That's how I see it-no guarantees. March crude-close- 28.18-up 21-high-29.10-low-27.70=====March unleaded-close-76.50--high- 79.50-low-75.70-an awesome range-I'm not a T.A.-any of you T.A. guys got a take on the action

-- Andy (2000EOD@prodigy.net), January 21, 2000

======================================================================

If they had succeded in driving POO down on Friday, you can bet we would have heard puff pieces in all the controlled media about the oil rally running out of steam, it's over blah blah, we don't need oil anyomore [that one just came out on Reuters or AP and is making the rounds] because commodities are not so inportant, we are an interner economy now yada yada

pure and utter BS

well they failed and will fail - oil is too big for uncle sam to control unless they initiate a war

-- Andy (2000EOD@prodigy.net), January 22, 2000.

A is A - the diff is that Calif requires a very specific blend of bas for sale. something about being less smog productive. Only a couple refineries do Calif gas.

C

-- Chuck, a night driver (rienzoo@en.com), January 22, 2000.

Gordon- thanks for doing this. Re. venezuela, I read that all that lost oil normally comes to the east coast, which is where I live. 17% of our national supply, right? So how much is in tankers before the crunch hits? Is there some contingency mechanism whereby the west coast tankers will come east and the whole country will share in the loss, or is the whole loss staying in the east coast?

-- wondering (wondering@gotta drive.com), January 22, 2000.

OH darn that should be either bass or gas.......

gas works best. Sorry about the rented fingers

-- Chuck, a night driver (rienzoo@en.com), January 22, 2000.

Andy,

I found this ...

DECEMBER 23, 1999 -- EIA data released on Wednesday shows the refining industry in a holding pattern. Inventories have been drawn down low enough to put the oil companies in a good position for end of the year taxes.

The low stock levels also make it possible for refiners to load up on lower priced crude oil and products when Y2K blows over and everyone is satisfied that there will be no major disruptions in the supply chain.

http://www.oil-gasoline.com

DISCUSSION HERE:

http://hv.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=0026J9

I read this elsewhere in a financial publication. But at least we got verification here.

-- Cheryl (Transplant@Oregon.com), January 22, 2000.

WORTH REPEATING ...

"The low stock levels also make it possible for refiners to load up on lower priced crude oil and products when Y2K blows over and everyone is satisfied that there will be no major disruptions in the supply chain."

-- Cheryl (Transplant@Oregon.com), January 22, 2000.

Thats the one Cheryl! I knew I got my panties in a twist over that one before CDC...

Someone should post it to the idiots who want to deplete the SPR - Richardson and his political know-nothings...

-- Andy (2000EOD@prodigy.net), January 22, 2000.

We import around 7-8 million barrels of oil per day. That oil plus what we consume domestically, another 6 million or so barrels, accounts for approximately 3% of GDP at this time. The products which are manufactured from oil affect the price of everything, heat, travel, shipping, plastics, air freight etc etc. This cost increase must be passed to the consumer who pays higher prices for their goods. Freight prices affect everything. Power prices would go up. Food prices would go up..the list is endless.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

So ... the refiners waited ... to load up on lower priced crude oil & products ... after Y2K blew over ... and they were reassured that there were no disruptions in the supply chain.

Looks like they gambled ... and lost. And, we're all gonna have to pay for this mistake.

-- Cheryl (Transplant@Oregon.com), January 22, 2000.

Do you think that if Irq has big production/shipping problems, we might see a "wag the dog" (speaking of weiners) scenario play out here with a small war being the distraction and the excuse (again)?

-- Laurane (familyties@rttinc.com), January 22, 2000.

No, the geopolitcs are completely different at this time. Much different than they were during the Gulf war. A war at this time is not acceptable globally.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Gordon -- Thanks for all your input on the oil thing. A marginally related question: Why is gasoline so much more expensive in the Los Angeles area (with several major local refineries) compared with, say, eastern Oregon, where there is nothing (that I know of). Is it just the taxes and regs and real estate prices, or are there other factors? Related question: How are you playing this? Futures? Are there options? What would would be contract months for futures? Contract months and strike prices for options? In futures (and options?) is there enough trading and open interest to get good fills on buy and sell trading orders?

Lost Angeles gasoline costs more because it has to be CARB spec. CARB is the California Air resources board. California made itself a special case a few years back and decided to make cleaner burning gasoline mandatory. They made all the refineries switch over and cost the industry billions only to find out the products used to make the cleaner burning spec were serious pollutants to the water (MTBE) that's Methyl Tertiary Butyl Ether i do believe.

As far as specific recommendations, I wouldn't advise a single soul here to get in or out of any market. Make your own decisions, don't do something without knowing anything. In this market you will get killed. Professionals I know are quite cautious at this time. Hell the heating oil market was moving like an epileptic on speed on Friday. My advice for the rollover was to not play it at all due to the uncertainty. That's still my advice.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Thanks for all your posts. Without getting into an ecomomic discussion, I would like get a better "feel" for your position regarding the bubble and the pin. If oil is the pin, then at what price would the pin contact the bubble?

ANswer

35 dollars is crisis entry. We're already at serious inflationary impact now. 40 bucks would be a real prick so to speak. Again, just my educated guess, not a prediction.

Earlier you said $60 oil but could $40 oil do it. I know - just an opinion and that is all I ask. I'm trying to get a read on the people that you deal with on a daily basis. From your vantage point, when do you think that you will see the "fear" in their eyes?

Answr: I'm seeing fear now. Once the SPR stories start flying we're in panic mode from the folks at PA avenue perspective IMHO.

Is this becoming a crisis, already a crisis, or past that point?

Answer: We're right on the cusp. A few more f*ckups and we will have some real problems on the eastern seaboard.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

"any of numerous small harmless chiefly tropical and nocturnal insectivorous lizards (family Gekkonidae)"?

I like that. A lot.

The greatest trick the devil ever played was convincing everyone that he didn't exist.

-- Gordon (g_gecko_69@hotmail.com), January 22, 2000.

Great thread, thanks to all participants (except butt).

-- Hokie (Hokie_@hotmail.com), January 22, 2000.

Hi Gordon, Can you comment on these two - apologies for the length of the second question...

1. I would like your "crude anlysis" of Maria Bartiromo ... last week she was trashing Oil Stocks on bubble.vision for her paymasters, do you forgive her, and if not, who is next best on bub.vis to play spot the salami with at lunchtime?

Answer: She still looked hot, but I'm starting to like Martha McCallum more by the day. If Maria doesn't shut up about oil, I'm gone.

2. I think I was one of the first to predict oil problems, way before roll over, mainly because the supply line from the oil deposits to the consumer is so long, with so many error/breakdown points en route. OPEC have steadfastly agreed to curtail production to September 2000. It is my hunch that they are working this adverse y2k- induced shortfall situation to their advantage, in other words being the masterful negotiators that Arabs are, they are sticking it to the USA whilst their own facilities are being fixed. Two birds with one stone. Also they are preserving their valuable and finite resource, ensuring it lasts longer, and reaping permanently higher prices - I believe this is a first move in pricing Oil in Euros in the near term. A warning shot to the USA to clean up their act, conserve energy like the Europeans and deflate Wall Street - or else. Any comments on this?

Answer: I think that's largely on target. We (the US) got arrogant on a global basis and forgot who controls the oil. Looks like the Sauds forgot who saved their arses from Sodomy Horsemane. I think there's a serious bias against Americans brewing out there. Perhaps time to start supporting Saddam again? Just kidding.

P.S.

Rumours of some National Guard personnel going to Venezuela... will the tanks be next "to help rebuild" when oil hits $75+ ?

I think the Vens are on track thanks to Hugo. That guy understands the balance of power from what i can see. If there are disruptions, he'll keep it quiet. And he's clearly cooperating with OPEC unlike the previous group, Giusti et al.

Great to hear from you andy

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

"...But the United States has built up a much better resistance to energy shocks. The oil-price explosions of the mid- and late-1970s helped spawn a new energy consciousness, and the giant steps taken by technology steered the economy away from manufacturing and toward services and the Internet."

answer: Yeah, that was a funny one for sure. My other personal favorite was from Abbey Joseph Cohen of GSachs who said (paraphrasing) "if you look at commodities over, say the last two hundred years the prices have been going down because they're so much easier to find".

Duh. Look oil ain't as important as it used to be, but it's still pretty dang important. What do you think they're fighting over in Chechnya? Vodka? NO,THEY'RE FIGHTING OVER OIL.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

What are your credentials, other than analysing oil?

I work at a Fortune 100 company analysing oil for a living. I've been directly involved in tens of billions dollars worth of oil industry acquisitions. I work on a trading floor where we hedge multi-millions of dollars of crude and products daily. When's the last time anyone used your analyses to make a billion dollar decision? Probably been a while. When's the last time you presented to a board of directors? When's the last time you knew about something before it appeared on Communist News Network?

I never claimed to be a genius. I'm a rather simple guy. I love oil and I thought since people here were interested, I'd try to answer some questions. Thanks for the post. Stick around, you might learn something from us blowhards.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

The question was, what impact did LIFO have on the current crunch?

If inventory reserves fall below 1999 levels, the company dips into the 1998 layer of oil stocks, which are priced at the average $11-a- barrel market prices at the end of 1998. Since New York oil prices stand at about $26 a barrel now, the company would incur a tax gain on its books.

Answer: Excellent question and post. Great article to. Did an admirable job of explaining LIFO to the layman. Folks, this is a real game which takes place each year here in the US. The game is don't piss off the accountants and incur a tax ding on your company. Most companies get a LIFO target and must make this target. You don't want to be over, you don't want to be under, you must hit the number. What that means is that you must have a specified number of barrels of oil on hand on Dec 31, no more no less, system wide. It includes products, feedstocks, crude oil etc. Imagine the enormity of that task in a multi refinery system with cargo's, pipelines, turnarounds. It can be quite a stressful time. With prices doing what they've done, I'm quite sure that a number of refiners chose to min crude at year end leaving them vulnerable. Then there was the whole "stop the world for 8 hours" phenomena which also contributed.

So I would say yes LIFO bullshit did contribute to this problem, but only slightly.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

Gordon, I don't believe I've seen this question in your "column": I'd like to know about what people can/are trying to do to try to keep the price of oil futures down. I heard that there was "an attempt" (by whom, I don't know?) to force the prices down during the last hour of trading yesterday, and it actually "succeeded" in the last 3 minutes of trading to somewhat depress March futures.

So, if you could please explain HOW and WHO might be involved in such manipulations, I'd appreciate it. I can imagine that there are political reasons to keep oil prices down, and interests which want to keep the stock market up would want oil down.

Answer: I'm trying to find out who had the size in the late trading friday. I'll know by Monday. There had to be some big size to make the ticks move like that, but I would also posit that the heating oil market had gone to far to fast and was overheated despite the enormity of the supply deficit.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

Gordon: You said: "The second biggest factor is the geopolitical process right now. I think OPEC and to a large extent, the world, have figured out that we've been exporting our inflation at their expense. This worries me a great deal."

Could you or anyone expand on this? How have we been exporting our inflation at their expense? Thank you. sdb

-- S. David Bays (SDBAYS@prodigy.net), January 23, 2000.

Gordon, You mentioned the Iranian ships (Karg Island), and some time ago you noted that the Saudi's were also taking long term leases that would let them store the crude for a while.

It would seem to be impossible to keep this number of ships (and their whereabouts) a secret. Is there any information on what is happening to them?

-- rocky (rknolls@no.spam), January 22, 2000.

you'd be amazed at what can be kept secret, but yes this one would be hard to do. I will inquire of my favorite boat guy this week and he will give me the skinny. If the ships have moved out, there's problems afoot.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

<So I would say yes LIFO bullshit did contribute to this problem, but only slightly.>

Gordon,

So what do you think is the MAJOR contribution to the current problem?

-- Chery (Transplant@Oregon.com), January 23, 2000.

---------------------------------------------------------------------- ----------

Gordon: You said: "The second biggest factor is the geopolitical process right now. I think OPEC and to a large extent, the world, have figured out that we've been exporting our inflation at their expense. This worries me a great deal." Could you or anyone expand on this? How have we been exporting our inflation at their expense? Thank you. sdb

-- S. David Bays (SDBAYS@prodigy.net), January 23, 2000

Answer: Have you noticed that our economy has survived the Russian Crisis, Mexican Crisis, Asian Crisis and a mini Latinam crisis? How do you think we did that? The dollar was king. The ultimate reserve currency. The Yanks to the rescue, or was it really Yanks to the scene of the accident to provide "expert witness testimony" at the insurance fraud. The mexican thing is a great example. We piled tons of dough into Mex and never once paid attention to the real situation there. When TSHTF, and all the bond fund managers started bleating about defaults, the USofA sprung into action and "saved the day for Mexico". Actually, I'll bet if you ask the average Mexican how we helped them out they'd have a hard time putting a finger on it. That's because inflation went bonkers there by the time we were done making all our US bondholders whole.

Pump up that bubble, big al greedspin and the federal reserve!

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

All for now folks. It's been fun. See ya next week.

Sure hope we don't have any more refinery mishaps. And i mean that.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

Gordon

Just a few points. In Saudi most of the exploration of proven reserves was in the Eastern Provence. There is probably alot more out there. The existing oil in many cases is still under natural pressure with some pretty hefty christmas trees in places like Kursanyah (sp?) and some of the more southern fields. Conversion to injection processing was pretty sticky when I was there. I can remember that drillers were looking for water in the Kurais fields and were cussing up a storm when they got back to camp. Why? They hit oil again! Some problems in Saudi worth looking into and considering.

1. The division of labor in Kingdom separates men from women (In other words women are excluded from alot of production activities). Labor and expertise is imported. As part of the Saudization programs automation was given a great deal of attention. Importing labor is also very costly.

2. Abdullah has always been very cool to the west. I believe Abdullah controls the national gaurd (Bedouin) and the rest of the Royals have the army. Makes for some interesting in Kingdom politics.

3. There is a continuing rift between the Shite minority and Sunni majority. Some consider this rift to be outright repression. I may go back some day so I won't comment further.

4. Oil production has been concentrated in the northern area (disputed zone) of the Eastern Provence to use up proven reserves shared by Kuwait, Iraq, Saudi and offshore with Iran.

5. The empty quarter has oil but it is a deadly business working there. The sand will literally kill you. I do not know the status of the developed fields in this area. Fields were drilled but the GOSPs were not constructed when I was there.

IMHO I believe any production problems would be found in the Abqaiq fields and export problems in the off-loading facility of Ras Tanura as well as downstream of the east/west pipeline. Secondly, I still have concerns about natural gas production (Shedgum gas plant comes to mind). Finally I would keep an eye on Abdullah and forget about Faud.

Finally, have you heard of any inside politics related to Abdullah's control of the spigot? My opinion is that a combination of problems related to technical, cultural as well as political could effect Saudi production. In other words if "embeddeds" are not a problem it may be a fine opportunity for Abdullah to shake things up a bit and fill the coffers.

Enough. Will follow up later with info from PEMEX. It is late and time to snooze. Glad your taking time to address the forum.

With much thanks.

PA Engineer

PS. I could swear "old gas" was still related to Federal Taxation policies.

-- PA Engineer (PA Engineer@longtimelurker.com), January 23, 2000.

PA Engineer -

Thanks - I used to work in Kingdom myself, worst and best 3 years of my life, if you know what I mean :o)

Couple of points...

1. Two i's in Shiite :o) ROTFLMAO!!!

2. This is the latest skinny from Dog Gone on another thread [PagingDog Gone...]

[snip]

The ports in Saudi Arabia are having severe technology problems. The one at Yanbu is basically toast. The one at Jeddah is "almost" fully operational. That's the good news. The bad news is that telephones are not working well at all. Maybe 30% efficiency on wireline and 50% on cellular. At this point the situation is deteriorating. Bin- Laden operatives are trying to cause trouble by stirring up passions. The foreign workers are staging a work slowdown to seek improved conditions (the Saudis don't like to do the manual work themselves). The phones are causing further complications in the whole export process.

Overall, things do NOT look good, and may deteriorate next month to the point where being a Westerner there might be a bad thing.

The local press is echoing the US line that there are no problems at all.

[end snip]

This tends to support Harry Schultze's inside information I posted yesterday...

-- Andy (2000EOD@prodigy.net), January 23, 2000.

Andy!

Another expatriate? Thanks for the spell check. Glad I checked back in! I know what you mean by the best and the worst. I spent a little over 5 years there. I don't get to talk to many people who have been there. Is your email real? Would like to chat. After Aramco I worked with Pemex for 3 years. In a strange way it was serious culture shock.

PS. My bucket was full of BS. How about yours?

-- PA Engineer (PA Engineer@longtimelurker.com), January 23, 2000.

Hi - e-mail is real,

I worked for Saudi Airlines - rigged my vacation time and Ramadan + all holidays (45 days a year) so that I was 2 weeks in, 2 weeks out. Never saw so much alocoholism in my life over there - all drinking Sid. Free [dry] flights on Saudi back to London but I used to fly swissair via Zurich to london for about $150 every round trip - champagne all the way :o) But in Kingdom was very hard, like doing a prison sentence, I felt sorry for the Aramco boys who only got out once or twice a year.

So that's what I mean about best/worst - made some great friends over there, lot's of partying but ultimately *boring*, just reading, watching videos, sunbathing, drinking sid! every two weeks out though was like winning the lottery - a 3 year holiday really.

I'd never go back though. Have to be mucho moola and a Harem :o)

-- Andy (2000EOD@prodigy.net), January 23, 2000.

Sh*t Andy!

I'm ready to cry. Brings back alot of good and bad feelings. Swiss Air the best of all airlines! Sidiki (sp?), many wonderful (not!) mornings. Wind surfing on the gulf (around the tar balls and crushed zit cans). The thing I remember about Saudi Airlines was the line at the ticket counter...you know...the mob scene! We would send the biggest person forward to grab the boarding passes. I used to know a few Brits that worked for Saudia. Will email later. Have a good evening.

-- PA Engineer (PA Engineer@longtimelurker.com), January 23, 2000.

I commented before on the inventory tax thing -- briefly just this: Just goes to show you the pernicious effects of the rapacious tax system we are subject to in this so-called "free" country. Inventory, investment, whatever, decisions made on the basis of tax consequences rather than good business practice.

The things that Gordon has discussed, which I also know of, he's been right on. So I put credence in what he says about other items. What does "Mr. billion dollar floor-trader / analysis expert" have to say?

Thanks, Gordon, Andy, and others. Don't draw down your own prep inventories just yet.

-- A (A@AisA.com), January 23, 2000.

Long Queus For Fuel In Zimbabwe

The southern African country has faced a
shortage of fuel, due to a lack of foreign
currency to import the commodity, since
early December but officials now admit
Zimbabwe was on the verge of grinding to a
halt.

PANA

-- spider (spider0@usa.net), January 23, 2000.

Great thread.

Gordon: The argument has been made that as crude prices rise, this has the effect of making certain 'marginal' wells profitable once again. As more and more of these 'marginal' wells begin to produce, this increases supply and a slows/stops/reverses the increase in crude oil prices. Thus, it is argued, crude will never reach XX dollars/bbl (choose your own number here).

In your opinion, does this argument hold water (or oil) and if so, at what price will we see enough increased production to place downward pressure on the cost of crude?

-- Arnie Rimmer (Arnie_Rimmer@usa.net), January 23, 2000.

Another perspective...

Presentation to a House of Commons All-Party Committee on July 7th 1999

THE IMMINENT PEAK OF WORLD OIL PRODUCTION

by C.J. Campbell

URL: http://www.hubbertpeak.com/campbell/commons.htm

-- Critt Jarvis (critt@critt.com), January 23, 2000.

The AP article posted above stated that "Oil expenditures, which accounted for 8.5 percent of gross domestic product in 1981, have fallen to about 3 percent, according to the U.S. Energy Information Administration." Oil was well over $30 in 1981. Does anyone know when the 3 percent calculation was made? If it was based on $15 oil, we would not be getting close to 6 percent of GDP.

-- Dave (dannco@hotmail.com), January 23, 2000.

Good idea, this thread, Gordon! Your time to shine, so don't be shy (glad you're not).

How's the kid -- I tried to e-mail you a congrats last summer (I think that's when it was, but looks like only the test doc to your address went through) -- congrats and thanks for all your contributions through the past year. Good perspective and real content.

-- jor-el (jor-el@krypton.uni), January 24, 2000.

so how much money are the people hiding away?

-- michael christopher karg (muzakmind@msn.com), October 05, 2004.