Replies to post #20909 on Value Microcaps Motherboard

[lentinman]

jtomm:

Excellent post. There are 3 issues, it seems to me.

OIL prices, GASOLINE prices and SPR.

I absolutely agree that it is POSSIBLE that oil prices will come down in a day or two IF New Orleans gets devastated AND if Bush announces that he will cover drop for drop any loss in production via the SPR (and assuming the SPR is undamaged). But, those are a lot of IF's.

On the other, let's say New Orleans escapes with just the usual disaster from an C4-5 and Bush doesn't announce SPR coverage, then it is very possible that oil could rocket.

I'm simply staying put UNLESS Bush announces 1M bbl/day from the SPR and the price goes above $75 anyway and if New Orleans gets hit incredibly bad. THEN, I'm selling into it because I think the demand for oil would drop quite a bit as the economy would get plastered. So, if the economy gets plasterd and Bush provides the SPR coverage, then demand is going to drop a ton, but yet reserves would still be there. Thus, I would sell oil stocks.

That has NOTHING to do with gasoline. Bush can unload all he wants from the SPR and it won't affect gasoline. I just filled up my car 10 minutes ago because I think gas is going to go through the roof no matter what.

Len

[10 bagger]

jtomm.....

You have an interesting post and it creates a lot of thought... The problem with your post is that if you are right it would be hard to act upon it.. Demand always goes down in times of national emergencies... The television takes care of that and when people become preoccupied they tend to travel less... Also the school season is upon us and Vacations will cease in most communities... So what may seem to be less dependence on oil is just an extention of normal times with preoccupation to current events thrown in...

I think that this disaster will cause a release of oil from National stockpiles because Bush will not fight two political wars at once with elections just around the corner... 3.00 gas and a war in IRAQ that seems to becoming unpopular are too much confusion to have on the plate at once...

I think that the FED is done with rate increases (I would be surprised if the SEPT increase will be made) and when Greenspan leaves his policy will be reviewed by the new chairman for at least six months before any other rate increases could/would be made...

I expect ALL oil stocks to go up and even the ones that are effected in the Gulf will be able to sell far out contracts to benefit from this desaster... The real money will be made in Oil Services and care must be made that you buy real companies.. The moves to the upsides,, have not even begun and the easy money is yet to be made in oil service stocks....The spike in Oil from this disaster will create bidding pressures on all oil service activities and the price of oil does not have to remain at spike prices once the contracts are made...More important is the effect on our economy and interest rates... Being that Greenspan is in his last days as Chairman his control of the board to continue raising rates will deminish and the possibility of an inverted yield curve is increased.... If the economy even looks like it is to stall as after 9-11 (In reality this disaster creates much more competition for capitol than 9-11) money supplies will be flooded by the fed.. The market will be unstable for the next few weeks but I doubt that any stock that is on my list will go down...SMALL BANKS just don't go down in uncertain times and the rest of my list is in Oil services and natural gas stocks...Good luck to all...If investors become preoccupied with this disaster and IRAQ Sept will be a down month..hank

[Bobwins]

jtomm.... Price of oil could go down but I doubt it. As you found, Gulf region contributes a huge amount of the crude, ngas and refined products to the US.

The rest of the country won't be immediately affected by New Orleans. Their energy needs will go on as before. Yes the price spike would hurt demand but how much can they cut back??? Let's say refineries are hit hard and 10% of US refined products are not available. Does that mean commuters in San Francisco will use 10 or 20% less gas??? I doubt it.

The lower refinery output will likely cause finished products and crude to go up. I don't see demand going down so fast that crude will drop that much. IF Bush releases crude from the SPR, that would lower prices but only temporarily. I think it's going to take months to get refineries back to full production and Gulf platforms back to full production of crude oil and ngas. I don't think Bush will drain the SPR when it has taken so long to fill it up. He will use the SPR to calm the market down and hold the threat over traders heads so that they can't drive the price to the moon with impunity. But in reality he can't keep using it without hurting the US's ability to survive some unforseen disaster or war.

I predict that the US demand for finished product will soar and foreign refineries will divert supplies to the US because we will be willing to pay more than others.

Bobwins