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Author: PaulEngr Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10413  
Subject: Gulf oil needs major shift?? Date: 9/20/2006 6:07 AM
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Nick Kapur's recent take on the Gulf oil discovery from Chevron is a bit off.

Nick said that 66% of our oil supply now is foreign and this is true.

But he said that it would take a much larger shift in order to remove our dependence on foreign oil. And that's where I have a difference of opinion.

Back in the 80's when foreign dependence was only in the neighborhood of around 40%+, OPEC pretty much had the hand on the tiller much as it does today. Then the U.S. shifted energy policies towards more domestic sources. OPEC's pricing policies pretty much collapsed at that time. We dropped down to about 32% if I recall correctly until the 90's when it crept back up to the current levels.

At those kind of levels (32%), remember that the middle East isn't the only player in town. There's also Canada, South America and there are some players (Kuwait comes to mind) that have never followed OPEC (Saudi Arabia) policy to the letter. At those kind of levels, OPEC's dominance is lessened even more significantly. Hence the reason that in the 80's, OPEC's price controls collapsed for all intents and purposes.

In support of Nick's argument, there is a new factor in play. Demand for oil on a global basis has increased and the U.S. now controls a smaller piece of the consumer demand. Which increases the leverage of sellers. But at this point I don't believe that we can accurately forecast how everything would play out back at the 80's levels of foreign imports (32%).

If we go back further in time, there was a point where there was a similar entity (I forget the name) based around the Texas producers. Their hold over pricing in the market effectively collapsed when demand outstripped their ability to supply and that's when the middle East entered the picture.
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