Newspaper article THE JOURNAL RECORD

Companies Find Success with Strategic Management

Newspaper article THE JOURNAL RECORD

Companies Find Success with Strategic Management

Article excerpt

Special Correspondent

WASHINGTON _ The Independent Petroleum Association of America said Monday that domestic oil producers are filing for emergency relief measures to help protect the U.S. oil and gas industry, an industry which has taken a severe beating over the past week as a result of the precipitous decline in the price of oil.

Calling on the Clinton administration to act immediately to stem the losses in the industry, the coalition of producers making the filing said urgent action was needed in the face of the downward spiraling pressures on oil in the futures market.

In filing the petition with the United States Department of Commerce for immediate presidential action, industry leaders are hoping to be granted emergency relief under Section 232 of the Trade Expansion Act of 1962.

According to IPAA President Denise Bode, the Clinton has the authority to impose an oil import fee in this kind of a situation.

Furthermore, Bode said: "The president can also require an emergency investigation to determine if there is a national security impact based on the effect this is having on the domestic supply of oil. We already have on the books a 1988 finding which says that there is a national security interest in oil."

The price of oil has dropped over the past week to below $15 a barrel, which is the lowest closing price since 1988. Taking inflation into account, this week's prices are a full dollar lower than those following the crash of oil prices in 1986. Since oil has been selling at an average price of $18 to $19 a barrel this year, the recent decline has left the industry in a state of panic.

Energy futures prices plummeted again Monday. Light sweet crude oil for delivery in January, which added 2 cents on Friday, tumbled 40 cents to settle at $14.57 per barrel on the New York Mercantile Exchange, a five-year low. Other contract months posted similar losses. Oil was trading in the $17 range two weeks ago.

The nation's small, independent producers have been the most dramatically affected by the crisis, according to Bode.

"We already know of job layoffs in California this past week as a result of the immediate impact of falling prices on the independent producers," Bode said. "We predict 100,000 jobs will be lost in this industry over the next year if something isn't done to help our domestic producers."

The significant drop in the price of oil this week is due in large part to the refusal of members of the Organization of Petroleum Exporting Countries to reach an agreement at last weekend's OPEC conference on limiting production.

"OPEC is directly responsible for the drop in prices because of their refusal to take action," Bode said. "They didn't limit their production because they are trying to punish Britain and Norway for not limiting their current levels of production. So even though there isn't a tremendous oversupply problem right now, the psychology of the market is such that it is very bearish on oil, and the futures traders just keep dropping the price trying to find its bottom. But it isn't bottoming out, it just keeps dropping."

Bode, a native of Bartlesville, also cites the possible re-entry of Iraq into the oil marketplace as a contributing factor in the bearish mood of the oil futures traders.

Although OPEC may be trying, as Bode contends, to punish the major producers in Britain and Norway, those feeling the brunt of this action are the small independent producers in the United States.

"It's the marginal wells across the country that are the most significantly impacted," Bode said. "Independent producers that may only pump out two or three barrels of oil a day, but who as a group provide over 20 percent of our country's oil and gas needs, can't survive this. The big overseas producers are not nearly as labor intensive as our small independent domestic producers are, so they will be able to weather this storm. …

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