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Sunday, October 17, 2004

Frozen Over

From CNN's Financial Sense Online

This Week's Theme
$70 A Barrel Oil?

  • Signals are growing that oil's price surge could push all the way to $70 a barrel, according to the technical analysts who forecast market trends by interpreting chart patterns.
  • Waves and storm surges that were more massive than previously thought may explain why Hurricane Ivan did such severe damage to the platforms and pipelines in its path.
  • Damage to oil and natural gas pipelines in the Gulf of Mexico from Hurricane Ivan could take up to six months to repair fully and restore production to levels before the storm.
  • Hurricane Ivan's impact on oil and gas production in the Gulf of Mexico has been worse than initially anticipated because of damage to pipelines.
  • Greenspan: The extraordinary uncertainties about oil prices of late are reminiscent of the early years of oil development. Over the past few decades, crude oil prices have been determined largely by international market participants, especially OPEC. But that was not always the case.
  • Trouble in Nigeria: Why the OPEC Member May Soon Have Trouble Meeting Its Quota.
  • Fearing that Al Qaeda or other terrorist groups could attack Mexican oil installations the navy has purchased two frigates armed with surface-to-air missiles and three radar planes from Israel.
  • "It's going to be very difficult for any of the legacy airlines to escape Chapter 11 restructurings," said Levine. "If that were to happen at Northwest, clearly his skill set would be highly relevant."
  • Jet fuel, a by-product of crude oil, accounts for 15% of the industry's costs, the second-largest expense after labor. And now that oil is approaching a record high of $54 a barrel, the entire industry is suffering.
  • Seventeen months into a shadowy uprising that has killed more than 100 people, numerous Saudis say they are angry not at the insurgents but at the United States for the invasion of Iraq.
  • Investors know jet-fuel prices are killing airlines' profits, but they will soon get an up-close view of the damage when major carriers begin reporting third-quarter earnings.
  • The main way in which emerging countries are in effect lending to rich countries--or rather one rich country, America--is by amassing foreign reserves, which are then invested mainly in Treasuries. The IIF expects emerging countries, led by China, to increase their foreign-exchange reserves by $246 billion this year, and by a further $225 billion next year.
  • As the odds of a full-blown oil shock rise, Morgan Stanley has little choice other than to cut their global growth forecast.
  • Rising crude oil prices will keep airline industry earnings grounded, according to an analyst's report. The industry could lose about $6.5 billion in 2005, up from earlier estimates of a $2.2 billion loss, and that number could grow if "the high price of oil begins to act like a `brake' on the global economy," warned Merrill Lynch's Michael Linenberg. Previously, he had forecast a $5 billion loss for 2004.
  • Whereas we can say that the 1970s oil shock was 'event driven', today's oil price increase is structural in nature. Specifically the current demand driven oil bull market is fueled by the incremental demand coming from the industrialization of China and the rising standards of living around Asia, which increase the population of energy using consumer durables such as motorcycles, air-conditioners, and cars very rapidly.
  • Venezuela has drastically raised taxes paid by foreign oil companies operating in the Orinoco heavy oil belt. International oil firms must now pay 16.6% in royalties on their output instead of the previous rate of 0 to 1%.
  • It's official: President George W. Bush will be the first U.S. president since Herbert Hoover in 1932 to head into an election with fewer people working than when he started in office. job creation over the past year has barely kept up with current population growth, much less making up for lost ground.
  • The SEC is looking at assumptions made in connection with pension accounting to determine whether those assumptions were reached to drive earnings results.
  • For seven consecutive quarters now, General Motors has made more from lending than manufacturing. Ford has become dependent on its credit business too.
  • America's long and successful ride to prosperity is threatened by a transportation infrastructure incapable of meeting future requirements.

Insane level of energy-related activity. Each one of these points is linked to an online report. Go to the FSO page to view the linked contents before they disappear.

The Poor Excuse Drudge claims that energy prices may be "the biggest story of the year" on his radio show. He berates Woodward for not predicting correctly the Saudi's promise to lower gas prices before the election. But then he reveals that the oil situation won't have any effect until after the election. You really can't ascertain what Drudge does or doesn't know about the real situation. What a whorific pimpsqueak.


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