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Gainers Editorial from Energy
From: Dave Farber <dave () farber net>
Date: Thu, 23 Jan 2003 15:46:44 +0900
------ Forwarded Message From: Kevin Gainer <kgainer () columbus rr com> Date: Wed, 22 Jan 2003 21:39:11 -0500 To: Dave Farber <dave () farber net> Subject: **SPAM** Re: **SPAM** Re: [IP] when the Wall Street Journal starts asking why are we invading Iraq, Bush is really in trouble. editorial attached. when I say "fade from radar screen" before 12/02 (see editorial) I guess we need to revise that to six months from NOW. Anyway, point was not to time the "pull-back" exactly, point was to declare in a soft way (every U.S. energy think tank is on our board - see our author req'ts doc. - so I absolutely can NOT say what is totally truthful and needs to be said) that the Iraq issue is a smokescreen. The bluster and bravado and cacophony (phony, indeed) of inconceivable pretexts SINCE the editorial have indeed cinched my claim. The war is over. regs, K. Stable Energy Prices Ahead You wouldn¹t think in the wake of 9/11 last year that anything could be ³stable² but, indeed, we are probably on the verge of a period of reasonable stability in energy prices. I make that claim a fortiori because a U.S. military invasion of Iraq is looking increasingly unlikely. Of course any such invasion would have the potential to turn World energy markets upside down, at least for a while. Indeed, I am intrigued at the level of attention given to Iraq these days by U.S. policymakers when one looks at the chorus of pronouncements Worldwide opposing U.S. Middle East policy. So, really, at this point I would look for the Iraq issue, and the concomitant significant risks to energy price forecasts, to rapidly drop off the radar screen (no pun intended!) before the end of this year. Another factor strongly at work at present is the faltering U.S. economic recovery: slow or no growth puts downward pressure on all prices. With regard to oil markets and prices, recent OPEC (the ten majors) production has been about 1.5 million barrels per day above quota levels. Overproduction would be even higher if not for problems at export terminals and flowstations in Nigeria that recently resulted in shut-in production. OPEC 10 overproduction during the second quarter had already reached 1.4 million barrels per day above quota levels, an increase of 350,000 barrels per day from first quarter levels. A ³Nominal² Quota Increase For OPEC Soon? The current OPEC quotas are far out of alignment with current production levels. OPEC could adjust the total OPEC quota upward to allow Algeria and Nigeria to produce more, and to bring the total OPEC quota more in line with likely fourth quarter production levels (projected by DOE to be almost 2 million barrels per day above the January 1 quota). While this would have the immediate effect of reducing overproduction above quotas by defining away the problem, it would not solve all of OPEC's difficulties. Even if OPEC were to roll back the January 2002 quota cuts (effectively increasing quotas by 1.5 million barrels per day), Algeria and Nigeria would only be allowed to produce an additional 48,000 barrels per day and 124,000 barrels per day more, respectively - far less than the capacity increases that they plan. Furthermore, increasing quotas may prove to be no more than a temporary solution to the quota/production alignment problem. OPEC has overproduced virtually every one of its quotas, and OPEC faces the danger that increasing quotas will just lead to more production - this time above a higher quota level. So, we¹re awash in oil but maybe not so in natural gas. Indeed, one of the more troubling areas related to energy price forecasts involves natural gas, which is the fastest growing source of energy consumption. Over the next twenty years or so, gas use could easily double and reach 162 trillion cubic feet. The natural gas share of total energy consumption is projected to increase from 23 percent in 1999 to 28 percent in 2020, and natural gas is expected to account for the largest increment in electricity generation (increasing by 33 quadrillion Btu and accounting for 43 percent of the total increment in energy use for electricity generation). In 1999, natural gas use surpassed coal use (on a Btu basis), and by 2020 it is expected to exceed coal use by 38 percent. These strong new requirements for gas don¹t bode well for gas prices. Much of the projected growth in natural gas consumption throughout the world is in response to rising demand for natural gas to fuel efficient new gas turbine power plants. Gas use is increasing for a number of additional reasons, including price, environmental concerns, fuel diversification and/or energy security issues, market deregulation (for both gas and electricity), and overall economic growth. In the industrialized world, natural gas is expected to make a greater contribution to incremental energy consumption among the major fuels, increasingly becoming the choice for new power generation because of its environmental and economic advantages. In the developing countries, increments in gas use are expected to supply both power generation and industrial uses. So, while we do anticipate ³renewed² stability in energy pricing overall during the upcoming period, there are still going to be a few hot spots like gas. ------------------------------------- You are subscribed as interesting-people () lists elistx com To unsubscribe or update your address, click http://v2.listbox.com/member/?listname=ip Archives at: http://www.interesting-people.org/archives/interesting-people/
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