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Tuesday, January 25, 2005

The Ponies

With winter not yet over, the beast has awakened from his oil industry hibernation:
Most the international oil companies (Exxon, BP, Shell, Chevron-Texaco, Total, Repsol) are following a strategy stupidly termed "capital discipline". I call it "scared shitless to make a business decision". The people running these companies are what I would call "Holocaust Survivors". They grew up in the oil industry in the late 70's and early 80's when the price of oil was soaring and the oil industry was drenched in cash. Then in the mid to late 80's the bottom dropped out of the price of oil. This low price world lasted for about 15 years. Then around 2000 things started to change again for fundamental reasons - namely that the world's thirst for oil is exceeding the available supply. Most major energy companies are continuing to invest as if the price of oil will never exceed the mid $20's. The 15 years these guys spent wandering in wilderness of low prices has shell shocked them into a mindset that they can't get out of. The first one of the major companies that breaks with the pack and starts investing for a $50/bbl world is going to make a killing.

Sometimes my job in the oil industry feels like shopping in a Soviet Safeway. You are hungry, your pocket is full of rubles, but there is nothing to speak of on the shelves. And what there is doesn't look very fresh or appetizing. But since we all have to eat we buy the crap that's on the shelves and convince ourselves that it really is much better than it first looked.
Sounds like the oil suits may continue to bet the farm on a "system" that echoes every (LasVegas | StockBrokering | LottoPlaying) gambler's rationalization. Gar-un-teed. The long-term visionaries may try something different. Yet, since investment involves gambling, even the new strategies have no guarantee.

"It was sad to it watch unfold to the bitter end. They'd churn their account into dust, chasing that initial success, running after the high that inexorably comes with making easy money. The tragic comedy was that such a trader would keep doing whatever arcane stupid shit they were doing, even in the face of sustained, consecutive losses, because they ardently believed in their 'system'. They'd been variably conditioned, Las Vegas style, to pursue that ghostly, fleeting, reward. Like a clueless gambling addict who believes they have finally discovered a way to beat the house, they were convinced, even as their trading losses mounted, that sooner or later the system would kick in, and their fortunes would reverse. So they'd keep priming the trading strategy with cash, with loans on credit cards, with the college savings earmarked for children, and even with their safe money, until they lost a good chunk of their net worth, or until an angry spouse would catch wind of what was going on and shut them down."
"And thus was born the neocons 'system'. Use of lightning fast, small elite military units backed by airpower to dislodge uncooperative regimes, free market policies installed rapidly in the vacuum thus created, and an atmosphere which would encourage business, free trade, and middle-class consumerism would emerge as a matter of course. This would produce democratic, US-friendly, nations. And so, any conduct which might be a bit duplicitous, could be excused in the pursuit (of) their lofty, noble, goal."


Professor Blogger DarkSyde said...

Hehe ... ecxllent metaphor with the Soviet Safeway. I plan to steal it, and call it my own!

5:33 AM  
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