Monday, December 29, 2008
"When crude hit $70 a barrel, Canada's oil sands became alluring. At $80, wind energy was profitable. And at $100-plus, even pricey plans to turn coal into gasoline came within reach. ... So far, companies aren't cutting major ongoing projects with oil under $50 amid a growing global recession and sharply shrunken demand. But increasingly they're postponing final investment decisions--the point at which contracts get signed, contractors are hired, and money is committed--at least until the lofty costs of doing business mirror crude's fall. ... George Kirkland, Chevron's executive vice president of global upstream and gas, ... 'For a period, oil prices went up faster than the costs of goods and services. But that's turned, it's definitely turned,' he said. 'And it's got to turn back.' ... According to Simmons & Company International, total exploration and production spending this year will exceeed $380 billion, including available figures from government-run oil companies as well as publicly traded producers. ... 'If we see oil sustained at $50 or $60, you will see more new projects delayed, especially in high-risk environments like deep water and unconcentionals like oil sands,' said Gary Adams, vice chairman of Deloitte's oil and gas group", Kristen Hays at the Houston Chronicle, 14 December 2008.
Until oil prices rise, investment in these projects will lag. Oil and gas and the related stocks look cheap to me.