CRUDE OIL PRICES STEADY FOR 1999
Courtesy of Gordon B. Moody
CRUDE OIL PRICES STEADY FOR 1999
Courtesy of Gordon B. Moody
According to Gordon Moody's Global Energy Outlook, crude oil prices are expected to remain relatively stable during 1999. This is the result of a current oversupply of oil. The resulting low prices for crude oil translate into more consumer spending for non-oil products and better profits for industry which depends on oil energy. While the U.S. consumes about one-fourth of the world's oil, the U.S. oil reserves are only about 2.5 percent of the world's oil reserves. The result is a great outpouring of U.S. dollars into the Oil Producing and Exporting Countries (OPEC). Of course, the current low cost of oil is some advantage to the U.S.
In an Editorial in Global Energy Outlook dated December 1998, Gordon Moody states the following: "Most oil industry problems could be solved by restoring crude oil prices back to their 1997 levels of $20 per barrel. Experience teaches that you won't get a sympathetic hearing from either the Administration or Congress. Cheap oil is seen as the one component that has kept the American economy from freefall. ... A ten percent cut in oil production worldwide would restore oil prices at a level that would provide economic security to producers and consumers alike. It is utter folly to take a 50 percent cut in revenue to produce 10 percent excess capacity."
The same Dec. 1998 Global Energy Outlook reports that the consensus of Time magazine's Board of Economists agree that the 1999 outlook for the global economy appears to be stabilized and that the Asian financial crisis appears to be contained. However, the world economy will not recover rapidly. It will be into the year 2000 or later that the economic damage can be repaired in some countries. The key Western hemisphere country, in terms of potential economic problems, is Brazil. If Brazil has to devalue its currency, there would be immediate financial turmoil in several other Latin American countries.
The worst economic basket case is Russia. With $17 billion in payments due in 1999, Russia has resorted to selling nuclear and intelligence technologies to some of the Middle East countries (often countries that support international terrorism). Russia is also leading an effort (with at least four other countries) to lift sanctions against Iraq, at least on Iraqi oil sales. Iraq owes Russia about $8 billion for weapons and technology sales.
www.padrak.com/ine/NEN_6_7_2.html
March 8, 1999.