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Be Careful Washington,
Your Special Interests are Showing!
With crude oil prices rising back toward the $80.00 per barrel level in the face of an uncertain global economic track, it would appear that the world’s “petroleum oil supply and demand balance” is tighter than most pundits would like to admit. Arguments that US oil prices are too high because of burdensome domestic crude supply would carry some weight if it weren’t for significant increases in oil use from developing countries like China. In other words, the world oil supply and demand balance has remained tight through a severe global recession and looks to be on a track to tighten even more significantly in the face of a recovery.
However, in the wake of the Gulf oil disaster, it would seem like petroleum supply has received another black eye, and that has opened up the door for a historic change in US energy policy. While few expect the 6-month moratorium on deep water activity to be extended permanently, the severity of the environmental damage taking place could prompt an aggressive stance by the Administration, especially as we go into a national election. And with a daily operating cost for deep water rigs in some cases exceeding $1 million dollars per day, it is possible that many operators will pull up anchor and move to less certain production areas outside the dictate of the US government.
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