Sunday, March 15, 2009

Energy Industry Shooting Self in Foot

You may recall a phrase that came out of the Republican convention last year, "Drill, Baby, Drill"? It referred to some folks' desire to access more of the fossil resources in Alaska and US waters. Well, despite the cheers it generated at the time, the oil business pays far more attention to markets than it does to politics and politicians.  

This NY Times article calls out the hardships facing oil and gas companies (and their workers) as the economics $45/barrel oil drives the number of rigs in operation way down. As almost everyone can imagine, the price of oil will go way up again ... in fact it already has already climbed $10 since hitting $35 in February. But as hedge fund director Adam J. Robinson says:
Inevitably, the [oil] market doesn't react; it overreacts and shoots itself in the foot.
No one (and I mean NO ONE) can predict the price of oil, but shutting down US capability at this point guarantees that we won't be ready to ramp up quickly if/when economies, and the global demand for oil, recover.

“Inevitably, the market doesn’t react; it overreacts and shoots itself in the foot,” said Adam J. Robinson, director of commodities at Armored Wolf, a California hedge fund.

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