I was looking at Downstreamer's forum this morning and came across an interesting post which I shall try to paste in here:

[ Downstream Ventures ]

[ Petroleum Markets ] Author Comment meg Unregistered User (1/18/00 11:49:46 pm) Reply Interesting post by oil "insider" from LeMetropole Cafe site -------------------------------------------------------------------------------- Although this is just a "post" and can not be corroborated, I have found the owner (Bill Murphy) and contributors at LeMetropole Cafe site are very reliable.

A NOTE FROM BILL:

The oil market is the talk of the town as WTI closed traded at $29 per barrel for a moment this afternoon. While the pundits on TV seem to be surprised at this move, Cafi members are not, as we have predicted this sort of price action for some time.

It is natural for all of us to want to get the right scoop and know what is really going on here. On TV, for example, there has been no mention of any Y2K problems.

One of the most respected and well informed members in the Cafi is Hugo Salinas Price who hails from Mexico. Hugo sent me the following correspondences to me for all of your benefit.

This is commentary that you just won't find in too many places.

Hello Bill! I have correspondence with a friend in Texas, whose integrity I can vouch for. I have known him many years. He has a great deal of experience in oil and gas; now retired; continues to observe present day events. I think his observations are wise and I have forwarded to you, two of his recent communications to me, with the idea that perhaps his thoughts may be of interest to the Cafi.

He wishes to remain anonymous.

Best regards Hugo

Hugo, I read through the Forum item in Gold-Eagle and found it very interesting. There is a thread of thought about the availability of oil but no one is saying they CAN'T produce. I say they can't without the benefit of looking at any recent numbers but rather base on my experience obtained when the Suez Crisis occurred in the Mid 50's when we exported our excess production to Europe.

I headed up a reserve-production study of a major producing area to determine how much excess capability our area had and for how long we could maintain that excess oil production. This required some rather in-depth look at reserves and historical producing capabilities of a broad cross section of oil reservoirs. Then some years later studying the natural gas industry as to its reserves and deliverability when regulation held down the market price of gas and therefore little or no drilling for gas for several years. I was always surprised when big utility companies did not look behind the gas reserves and deliverability before building multi-million dollar power plants with only the vaguest opinion as to fuel supply, not realizing that less and less deliverability was being developed nor, most important, that the reserves start decline from the very first day of production.

Today the areas that I studied have now declined to the point former boom towns are now being abandoned. The talents to discover, develop, transport and distribute are now selling shoes, and would take decades to retool all the talents and hardware required. Yes some gigantic oil reserves have been found in 2,000 feet of water but the growth rate of the world and demand for energy far outstrips the ability of the industry to find and develop the oil. Instead of the 7 big sisters controlling the worlds oil supply, it is now 7 nations often controlled by a dictator rather than shareholders - who may have knowledge of all the diverse factors evolved but probably have greater demands to provide improved standard of living for a hostile population today rather than next decade which is required in the oil industry to develop such gigantic volumes of oil and gas and get the oil to the places it will be needed.

Big prices have a way of speeding up the process and has through the decades but now we have to find new oil in very hostile environments and independent oil men do not have the necessary capital nor political now-how to bring together significant oil finds 200 miles off-shore in 2,000 feet of water after obtaining the rights from a country such as the Congo. The problems take a long time to resolve, so buy a "bug" and a bicycle, and build a little storage for your own use.

Gosh this is too wordy and rambling.The fact that they are considering holding current OPEC quotas past March now on into September makes me even more suspicious that there is very little excess capacity currently available. A form of "Just in time Inventories" is the industrys current practice so there is little room for any major interruptions or surprises.

Hugo

Since my note about Oil was so long I left out my most chilling experience when I learned that the Strategic Petroleum Reserve Program was put together on such flimsy and faulty logic again demonstrating that very few people have a broad view of what it takes or are able to make the correct decisions when such complex Programs are initiated.

The discovery of oil (always in the wrong places) and distribution of 75,000,000 barrels of oil per day to provide current world demand is complex....... then add in the variables of rate of decline, rate of discovery , political unrest and that the decisions that used to be made by the 7 sisters are now being made by 7 nations, some of which are not very stable, one can readily read the tea leaves that soon major disruptions and or redistribution will occur.

This time, since "Just in Time" inventory practice is in place, only a few days of disruption can be tolerated. I don't think you'll find anyone listening , but I am pleased to have a platform and would want to be anonymous.

BR "

Not exactly easy, it would appear, to get new oil into the world-wide system of demand.

-- jeanne (jeanne@hurry.now), January 19, 2000

Answers

Thanks Jeanne, I found this statement interesting:

"The fact that they are considering holding current OPEC quotas past March now on into September makes me even more suspicious that there is very little excess capacity currently available. A form of "Just in time Inventories" is the industrys current practice so there is little room for any major interruptions or surprises. "

Ray

-- Ray (ray@totacc.com), January 19, 2000.

Thanks, juicy stuff!

-- Hokie (Hokie_@hotmail.com), January 19, 2000.

Jeanne,

As of 1:00 pm (et), Plug Power is up $21.25 (33.5%) near all time high of $85. Can I borrow ten grand from someone quick?

-- phoneman (bcrefrig@excelonline.com), January 19, 2000.

Time to buy heating oil and diesel for storage against times of very expensive/rare fuels. These are not hard or dangerous to store properly. Economic weapon of war (oil) against overleveraged economies (cascading debt and derivatives default) = western nations paralysis in the face of conquest by eastern nations.

-- ..- (dit@dot.dash), January 19, 2000.

Two things:

1. Phoneman, was it really necessary to toss in Plug Power's price of today? I was seriously thinking of buying about $10K last week when it fell to $56. And to think it opened just this last October at $12. A VERY big... SIGH... !! ut I am trying to hold off buying until I see what Gangreenspun is going to do next month and what 2/29 is going to do and how y2k is going to play out. But, damn its hard not to jump in!!!

2. Hugo is telling us the very same thing that someone else was telling us back about the time of DD1stLight was telling us 'stuff'. Don't remember who it was...but was basically that the the oil is not there in the current reserves and the money, people, and mindset is not there for the exploration and development of new reserves. Put all of that with the possible failure of the current pumping/transporting of oil going TU and things can get serious REAL quick.

Taz...who should stay off this forum and just weave her damn rugs!!!!

-- Taz (Tassi123@aol.com), January 19, 2000.

I wonder if I can get a diesel engine'd vehicle at this late date? I could store a whole lot more of the stuff than I can of gasoline...

-- Mad Monk (madmonk@hawaiian.net), January 19, 2000.

Geez. I'm not even worried about MY having gasoline. I'm getting more and more concerned about TPTB and their NEED to CONTROL oil, etc.

War.

a very worried *sigh*

Mike

====================================================================

-- Mike Taylor (mtdesign3@aol.com), January 19, 2000.

Mad Monk --

I've got a 78 'Cedes 240, that I bought for $500 at a tow yard last year. Looks good, runs great, on 500 gal diesel stored in the shed.

>"<

-- Squirrel Hunter (nuts@upina.tree), January 20, 2000.