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MRV Communications, Inc. Message Board

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  • normboyz normboyz Apr 1, 2005 2:11 PM Flag

    Check out the froth in the oil patch

    Congrats Moon in locking in some of those gains.

    There is one area of uncertainty with respect to oil that no one is talking about these days. It can be such a pinch on the consumer that it may force the politicians to take action. I suspect that the $60 level may be the threshold at which this could happen. In what form? Here are some ideas:

    1) special legislation to incentivize and substantially increase refining capacity in the U.S. (with federal preemption that overrides any state or local legislation; i.e. zoning, emission controls, etc.)

    2) stop filling the SPR;

    3) threaten to release a portion of the SPR (less likely with Bush, but more likely if oil gets too high and causes a recession)

    4) comprehensive legislation to incentivize energy conservation (an old idea that the politicians will push to look good)

    5) Anwar in Alaska gets adopted and accelerated treatment (not counting on this one to help much as it would still be years away to see meaningful results.

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    • "1) special legislation to incentivize and substantially increase refining capacity in the U.S. (with federal preemption that overrides any state or local legislation; i.e. zoning, emission controls, etc.)"

      Refining capacity is not the problem (there is currently enough in the world). If consumption of gasoline continues to rise, then yes, at some point in the future refinery capacity would need to be increased. Current high crude/gasoline prices are caused by crude prices - and these are caused by demand (and, to some degree, speculators).

      "2) stop filling the SPR;"

      It is close to full now. While it does directionally put pressure on demand, the rate of filling is a very small % of world demand (lost in the rounding).

      "3) threaten to release a portion of the SPR (less likely with Bush, but more likely if oil gets too high and causes a recession)"

      This would probably have the largest impact on the speculators. And, the threat alone will only cause a temporary blip. Actual release will have a more meaningful impact - but again, only a marginal impact on the supply side.

      "4) comprehensive legislation to incentivize energy conservation (an old idea that the politicians will push to look good)"

      Conservation is the best method to currently impact the supply/damand curve (short of a world-wide recession/depression). I am all for it. However, it will probably not occur unless crude rises above its inflation adjusted peak - still a ways to go...

      "5) Anwar in Alaska gets adopted and accelerated treatment (not counting on this one to help much as it would still be years away to see meaningful results."

      Yes, years away until it could have any impact. While it would then be a positive for supply (every little bit helps), it would not solve the problem of growing demand.

      • 2 Replies to retiredguru3
      • retiredguru, good post, but don't ya think the problem is both the cost of oil and US refining capacity.

        Gas prices are up because the refiners are now run by business guys, rather than engineers (as compared to 10 years ago) and they understand that limited refining capacity helps them in the long run.

        If oil supply was the real problem, how do you explain the oil inventory numbers? Supplies substantially higher than last year, 314 million barrels, I think. I know demand is increasing, but doesn't this inventory data indicate that supply production is meeting that demand. And even if demand does increase at 2% a year (due to Asia), don't you think with oil at $55 barrel, you soon find all kinds on production coming online? Too much $ to be made, too tempting.

      • lets just say-----our priz and vice priz Haliburton turned the dogs loose---if you need a case study take a peek at Callyfournahs
        bout with Mr. Crude and its gastricial disstress.
        I know----i know a over simplification but the premise is correct.

    • " 4) comprehensive legislation to incentivize energy conservation (an old idea that the politicians will push to look good) "

      Good board today : Kludge and Incentivize to build up folks' vocabularies.

      We can also have Laura Bush to hit the airwaves with some energy conservation tips.
      " Why ... when entertaining our Saudi friends , we save on energy by not cooking at all and simply sending out for Chinese "

      Beware the giant fiber-optic tentacle snaking up out of the ocean though. Beware .

    • agree this is why sell into strength and buy back on weakness - but in my opinion this is a demand issue worldwide and depletion is a real issue. Getting tougher to find the stuff and the infrastructure rigs,refineries and even transports are screwed to max due to green weinies and all the other nimbys

      We shall see how it plays out but the dow in my opinion is going much lower and the fed has painted them selves into a box....

      I keep watching india china and the rest of the world if they start slowing down I will change my mind but until then we are being squeezed by demand.... not supply.... way too much neglect on our country and it is going to come home to roost....

      anyway go mrvc -

    • For those watching VLO now up from $68 to $77.50 in less than two trading days.

 
MRVC
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