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2.25.2003
Oil on Margin Ever since the blackouts rolled through California in 2000, talk of energy crises have become almost de rigeur. Oil and natural gas prices in particular have been volatile. So to hear that Energy Secretary Spencer Abraham was summoned to the Capitol today comes as little if no surprise. Abraham refused to release oil from the Strategic Petroleum Reserve as an attempt to drives prices down. His motivation is subject to a high amount of interpretation. Some have suggested, as does CNN, that President Bush will wait until war breaks out to release the SPR and cause a dramatic drop in spot market prices. Nevertheless, Abraham seemed convinced that the situation in Venezuela was resolving itself and that OPEC might seek to cut production if the SPR was tapped. While it’s an interesting concept, it would also cause a margin crash that would not far well for energy firms. There is no doubt of course that war speculation has caused oil prices to rise, but the ultimate question will be just how comfortable will the US government be in allowing energy prices to stay high. Oil exporters like the currently high prices to protect unbalanced economies. Oil consumers like cheap products. However, the consumers in the US tend to be individuals, in the form of car owners. Producers in the US tend to be corporations who really would favor demand to meet supply. At this point, petroleum companies apparently have reason to be happy, but the amount of oil in reserve is growing. Could it be then that the firms just hope to use international problems to hide other concerns? Stay tuned. |
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