OCR Text |
Show INTERNATIONAL OILS ON THE MEND Energy company managements as well as investors have had to cope with rapid change in this vital industry in the last decade. Basic operating conditions con-ditions have been rather difficult and volatile, ranging from abundant supplies sup-plies of energy through artificial scarcity scar-city and back to the present, perhaps temporary, glut all within the span of ten years or so. VOLATILE MARKET ACTORS Stock market values have in turn pretty much duplicated unstable energy industry conditions. Stock prices have ranged from euphoric heights, based on the erroneous assumption that we were in for a prolonged pro-longed period of energy scarcity, to recent re-cent depths of despair that oil prices would plunge sharply, driving nations and companies into bankruptcy. Presently, with oil prices stabilizing, patient investors seeking basic values have been accumulating some of these oversold energy issues. In addition, traders have also been moving into this often turbulent area, searching for possible trading profits but prepared to abandon ship instantly on even a hint that crude oil prices are beginning to weaken. SOURCES OF INSTABILITY Before going any further it would be helpful to briefly review the basic origin of the very changeable market conditions that have prevailed in international inter-national energy markets in the last decade. In the 1960s and early 1970s energy supplies were abundant and secure. As consumption grew, the U.S. became more dependent on foreign oil, principally from OPEC. Then came the Arab-Israeli war and Arab oil embargo of 1973 followed by the oil price shock of 1979 which was caused by the Iranian revolution. These two events basically caused oil prices to surge some 1,200 percent since 1973. Inevitably, consumer resistance to this incredible rise in oil quotes first led to slower rates of growth in consumption and then, because of conservation and use of alternative fuels, to an actual decline in petroleum utilization in recent years. OUTLOOK FOR THE FUTURE While future Arab-Israeli wars certainly cer-tainly cannot be ruled out, continued energy conservation and increased reliance on the use of coal and nuclear power should means that another Arab oil embargo would be of doubtful effectiveness effec-tiveness and hence would not be invoked invok-ed again. As for more Iranian-Iraqi-style wars that might involve oil-producing countries coun-tries and again invoke panic stockpiling: stockpil-ing: Here, too, the world has hopefully hopeful-ly taken note of the fact that both Iran and Iraq have been producing and selling sell-ing just as much oil as their war-damaged war-damaged facilities can sustain. And there is no doubt that barring all-out nuclear war any other nation in a similar situation would do the same. With respect to Iranian-style revolutions revolu-tions in any other oil producing nations na-tions : We believe once such a conflict runs its course, whoever is in control is unquestionably going to need maximum max-imum revenue and will do its best to crank-up output just as soon as possible. possi-ble. Logically, therefore, local wars or revolutions should not have the same impact on world oil prices in the future as they have in the recent past. BRIGHTER VISTA FOR INTERNATIONALS While all of the oil internationals will benefit from favorable cyclical economic recovery and more stable energy prices, the Aramco partners, in particular Exxon, Standard Oil of California, Texaco, and Mobil, will also profit from not having to buy overpriced Saudi Arabian crudes above the market. However, because of some uncertainties uncer-tainties with regard to sustained worldwide economic recovery, we regard only one Exxon, the largest international as being in buying range at the present time. The other integrated internationals such as Mobil and Texaco can certainly be held for gradual longer-range recovery. |