Re: (OT) $100 oil!?! Who wins?

"Lord Gow333, Conservative Fullback!" <lordgow@xxxxxxxxx> wrote in
news:13kmubk4q3t8g2d@xxxxxxxxxxxxxxxxxx:



--
Visit www.fairtax.org , sign the petition, and make America what it
could
be.


I'd only support the "fair tax" if imports from foreign countries were
included. Thanks to your ilk, Americans pay taxes, yet foreign companies
are free to import their goods to America without paying a penny in
tariffs.





Surprise! It's not Exxon Mobil!

http://custom.marketwatch.com/custom/excite-com/news-story.asp?guid={53
5DB4AF-A88C-4D29-952D-5D3658CF3871}

$100 oil's winners and losers -- not necessarily who you'd expect

Who benefits and suffers from record-high crude isn't always so
obvious By Jim Jelter, MarketWatch
Last Update: 6:13 PM ET Nov 23, 2007

SAN FRANCISCO (MarketWatch) -- As crude-oil prices continue their
assault on the century mark, no one needs to tell consumers what it
all means. They feel it every time they pull up to a gas pump or order
a load of heating oil for that cranky furnace in the basement.
But economists and investors are taking stock of the new numbers,
mapping changes in the flow of capital, and adjusting portfolios to
capture the gains or at least limit the losses.

Some of those twists and turn lead down obvious paths. Others are more
obscure. Here is a smattering of both.
The losers ...
With nationwide gasoline prices are averaging more than $3 for a
gallon of regular unleaded, there's not a lot of public sympathy for
the plight of Big Oil. But not all oil companies are created equal.
Sifting through the industry's third-quarter scorecards shows nearly
all of them saw profits pinched by the rising cost of crude. That's
because very few of the big brands produce as much oil as they sell
through their service stations. What they don't produce, they have to
buy on the global market. When the price at the pump doesn't rise as
fast as the price of the raw material going into the refinery,
refining margins shrink. That's been the case almost across the board
since the summer, at Exxon Mobil (XOM: news) and Chevron (CVX: news)
and right on down the line. For refiners such as Valero Energy Corp.
(VLO: news) and Sunoco Inc. (SUN: news) , with little or no production
of their own, the high price of crude is felt even more acutely. This
is clear from their share prices. Valero stock is down 15% from its
summer peak, and Sunoco is down 16%.

RELATED QUOTES
XOM85.68 -2.61
CVX83.79 -2.88
VLO64.05 -1.91
SUN65.52 -2.21
GM26.90 -0.26

Gasoline prices, meanwhile, are up nearly 10% in just the past month,
though they still have a way to go to match the $3.28 all-time high
set May 24, according to the AAA's daily gauge.
While refiners hold fuel made from crude bought weeks or months ago,
they face gradually stiffer competition from vertically integrated oil
companies whose own output partially shields them from volatile crude
prices, giving them a slight advantage at the pump.
Rising gas prices also spell trouble for automobile manufacturers, who
face falling sales and slowly swelling inventories of unsold trucks
and SUVs. Much of this has to do with the crisis in residential
building, since contractors aren't buying new trucks, but the combined
effect is producing some major concerns in Detroit, especially
following GM's (GM: news) big third-quarter loss. And GM's share price
has declined nearly 40% in just six weeks. See full story.
But mileage is a rising concern chipping steadily away at light-truck
sales, forcing the industry to fall back on dreaded incentives. Even
Toyota (TM: news) is using incentives to lure customers to its big,
slow-selling Tundra pickup, which is starting to look like a rare
misstep by the Japanese manufacturer.
Airlines are also under the gun from higher crude prices. With fuel
costs typically the second-highest cost, after only employees, the
airline industry is among the most vulnerable to oil prices. Already
several carriers, including United Airlines parent UAL Corp. (UAUA:
news) , have announced plans to jack up fares to cope with the extra
cost. See related story.
In terms of what flows from the refinery, jet fuel is a first cousin
to diesel fuel and heating oil. One needs look no further than the
biggest consumers of these petroleum products to find more pain. It
also means that airlines, truckers, railroads and about 8 million
households -- primarily in the Northeast -- will be competing for
essentially the same fuel supplies. Crude oil, the raw material,
accounts for 60% of the cost of heating oil. Refining, marketing and
distribution make up the rest. In addition to the economic and
geopolitical factors that hold sway over the oil market, weather poses
another huge unknown. A severe cold snap in New York, for example,
could send already lofty heating-oil prices soaring, prompting
warnings from some industry analysts that homeowners should be
prepared to fork out nearly twice what they paid last year to stay
warm. Higher gasoline and heating-oil prices crimp consumers, while
higher diesel- and jet-fuel prices lift the cost of shipping goods to
market. Together, these give retailers one more reason to fret over
increasingly fragile-looking holiday sales.
"These are big macroeconomic issues that tend to affect everybody,"
Michael Niemira, chief economist at the International Council of
Shopping Centers, said. "At some point, you have to expect some
reaction." But Niemira thinks the tipping point for retailers probably
won't be reached until 2008, he said. That's because the average
American's income this year has kept ahead of energy costs, with $20
year-on-year nominal growth in income outpacing a $10-to-$15 rise in
gasoline expenditures. "It appears that income is still the silver
lining in this otherwise negative picture," he said.
Meanwhile, retailers are protecting profit margins by hiring fewer
workers. Federal employment figures show a drop in retail jobs in
three of the past five months. Another step they are taking is to run
down inventories, which also holds down transportation costs.
The growing popularity of gift cards, rather than real merchandise,
helps. Gift cards accounted for a whopping 18% of consumer
expenditures during last year's holiday shopping season, and that is
expected to grow this year. ... and some winners ...
So who comes out ahead when oil crests $100 a barrel?
From an investors' standpoint, the obvious play is to rush into the
arms of the alternative-energy companies. Biofuels and crop-yield
boosters like Monsanto (MON: news) have already been targeted by Wall
Street. When crude first flirted with $100 two weeks ago, Monsanto
shares hit an all-time high $99.98, up 84% this year and just shy of
its own century mark. They have since backed down.
That suggests that anyone joining the stampede into biofuels might be
late. But there are plenty of other plays in the alternative-energy
game, which is rife with start-ups backed by capital fleeing the
subprime-mortgage crisis or other underperforming sectors.
As in the tech boom of the 1990s, however, few of these new companies
will emerge winners. So the word from Wall Street is to pick wisely.
A less risky and less obvious investment strategy in all this is
aerospace. As crude prices climb, airlines will accelerate purchases
of fuel-efficient aircraft, also benefiting parts makers.
The rising tide of petrodollars is also filling the coffers of oil
producers. Many of those happen to be state-owned oil companies, which
means some of the cash flow will be diverted to the respective
militaries assigned to protect these nations and defend their wealth.
That's good for that other international megabusiness: arms makers.
Look for lucrative weapons deals landing in the laps of companies like
Lockheed Martin (LMT: news) , whose shares are up 24% in three months,
and Raytheon (RTN: news) , up 17% over the same period. Defense
spending in general, even among oil-importing countries, is rarely
impacted by commodity prices. Wall Street knows this.
Meanwhile, oil-service companies will continue to hawk their wares and
expertise to a world scrambling for crude. Many have already enjoyed a
blistering run this year, leading the Philadelphia Oil Service Index
($OSX: news) on a 42% romp that makes it a star performer in any
portfolio. Further gains will hinge on how long oil prices cling to
their new roost. But as long as they do, they will draw big bucks to
exploration and production. Major beneficiaries of the trend have
included drilling-services giant Schlumberger (SLB: news) and offshore
rig owners Weatherford International (WFT: news) and Transocean (RIG:
news) , all with far-reaching overseas contracts and all with share
prices up at least 48% so far this year.
The focus of the big exploration dollars is deepwater offshore, where
the rewards are greatest.
Earlier this month, Brazil's state oil company, Petrobras (PBR: news)
, announced a staggering payoff for its efforts in this arena.
Drilling results show its Tupi field could hold up to 8 billion
barrels of recoverable crude. If it pans out, that would put Brazil's
oil and gas reserves somewhere between those of OPEC members Nigeria
and Venezuela. Brazil's success has a certain historic and ironic ring
to it, and could land OPEC once again among the big losers in a world
of high-priced crude. The 1973 Arab oil embargo, which triggered the
first global energy crisis, sent oil prices soaring from $3 to $11 a
barrel in short order. It also encouraged a host of non-OPEC-member
countries to find and develop fields in environmentally hostile
corners of the world that never could have turned a profit otherwise.
By the mid-1980s, as oil from these new fields poured into the market,
OPEC kingpin Saudi Arabia decided to flood the market to drive down
prices and halt any further loss of market share.
But OPEC's share of world oil production has slipped from its 1973
high of 52% to about 41%, weakening the group's ability to outpump
rivals. Given already tight supplies and strong global demand, don't
look for a sudden flood of OPEC crude on the market any time soon.


LG (off to buy stock in a windmill)

.

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