The energy industry needs something more than a
Band-Aid in the form of an oil import fee, according to Robert
Spears, who , along with sons Richard and John, operates Spears and
Associates, a Tulsa firm specializing in energy industry analysis.
"People see we need an energy policy dealing with all forms of
energy, and the oil import fee does not address all those other
forms," Spears said.
"There are people who say they are opposed to an import fee,
thinking Washington will stop with that, not thinking of a more
complete response to the problem.
"The longer term needs to be addressed," Spears said. "Someone
ought to have that (addressed) so that the affected industry could
plan for the long term."
Besides the blow to national security that dependence on imported
oil creates, Spears pointed out three other implications of the oil
- Balance of trade - If the United States imports 9 million
barrels per day by 1990, our import bill will rise from the 1986
anuual cost of imported oil of $35.5 billion to $81.4 billion. The
balance will be increased by $45 billion.
"I don't know that the people from Washington are aware of where
the imbalance is coming from," Spears said. "I don't think anything
rivals cars or oil for making up the balance."
- Weak competitive position of manufacturers - "Manufacturers
don't realize we will be more uncompetitive than we are now," Spears
said. "As the cost of imports grow, the general manufacturers who use
energy in production will be more uncompetitive than a manufacturer
located in an energy producing country."
- Dismantling industries - Large firms in the service industry
will survive, Spears said, but all others are serious candidates for
acquisition, merger or liquidation. Spears expects to see a modest
price increase next year in the service industry, due more to
consolidation of companies than an increase in demand for servicing.
The lack of capital budgets is hurting Oklahoma, Spears said.
Borrowed money, investor money and cash flow money are all drying up,
and it's that way for all sizes.
Spears met with clients in Houston last week, and though cautious,
they believe the price will not fall lower.
"Most of them are being extremely conservative in their planning,
because if they weren't, they didn't survive," Spears said.
"They see inventories of goods and services at the bottom of the
barrel, so they expect the price to rise, that the price might
improve, or certainly not get any worse," Spears said.
The price of crude oil will stay below $20 per barrel, Spears
said, because if the price rises above $20 per barrel, the Saudi
Arabians will open their production to drive the price back down.
The Saudi Arabians will protect the long run value of their crude oil
reserves by keeping the price down, Spears said.
Both consultants agreed they are looking for the gas side of the
industry to improve before the oil side.
Robert Spears suggested the industry be renamed the gas and oil
industry, because the revenue from gas sales is $40.05 billion, while
wellhead value for oil is $44 billion. In 1981, crude oil sold for
about twice the natural gas price.
Spears expects the domestic production of oil to drop from this
year's 8.75 million barrels per day to 8 million barrels per day by
the spring of 1987. …