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Posted on  

April 9, 2002

Impacts for Investors as Middle East Tensions Heighten Risks to Oil Supplies Says S&P; Industry Survey; Fallout from Standoff between OPEC and Russia Over Oil Production also Mentioned

A Possible U.S. Attack Against Iraq Will Determine the Extent

NEW YORK, April 4 /PRNewswire/ -- Standard & Poor's has released its forecast for the Oil and Gas Production and Marketing Industry, which sees Russia emerging as an alternative to Middle East oil supplies and poised to regain its position as the world's top crude-oil producer for the first time in a decade, as OPEC member nations comply with the cartel's quotas in 2002. The leader in global financial research and investment analysis says that short-term supply risks due to Middle East tensions and possible expansion of the war on terrorism to Iraq are mitigated by the increased stores of oil built up during the recent economic downturn. Beyond these issues, the depletion of current reserves poses an ongoing long-term challenge for the industry. For U.S. natural gas producers, the drop in actively-producing gas rigs in 2001 stemming from a slow economy's reduced demand could mean a return to the high gas prices of 2000, as demand outpaces the reduced supply this year. The forecast is part of Standard & Poor's Industry Survey on Oil and Gas: Production & Marketing, a study produced every six months by the firm's senior equity analysts. Standard & Poor's Industry Surveys series keeps a watchful eye on 51 U.S. industries, offering insights into trends and conditions that affect leading companies' market performance.

"With the Middle East holding 66% of the world's oil reserves and supplying over 35% of its current production, heightened tensions in the Middle East could lead to a short-run supply of oil. Also, energy production and distribution are vulnerable to the risk of terrorist attacks on the U.S. and elsewhere," says Tina Vital, Standard & Poor's Oil and Gas analyst and author of the survey. "But a serious problem looms in the long run as well: the depletion of oil reserves. From 1980 to 1990, oil reserves rose by 54%; however, from 1990 to 2000, oil reserves have increased by only 1.4%. So is oil really running out?" she continues. Vital concludes: "The easy answer is yes: Oil is a non-renewable resource and will someday become scarce. The hard part is determining when."

Industry Surveys for the Oil & Gas: Production & Marketing Industry looks at the issues affecting all segments of the oil and gas production industry, including: the National Energy Security bill before Congress which affects the oil and gas industry on matters including automotive fuel economy standards and a mandate to boost ethanol use; foreign trade restrictions, notably regarding Iran and Libya; the growing prominence of newly-privatized firms from emerging market economies; the impact of just-in-time refining; and Europe's lead in the development of renewable energy projects. It also looks at how certain of these issues and industry consolidations affect companies such as BP, ChevronTexaco, ExxonMobil, Royal Dutch/Shell, and TotalFinaElf.

Standard & Poor's Industry Surveys provide a broad and fundamental overview of each industry's structure, its recent performance, and an analysis of trends that will influence it in the future. Each survey is organized into the following sections: Current Environment, Industry Profile/Industry Trends, How the Industry Operates, Key Industry Ratios and Statistics, How to Analyze a Company, Industry References, Comparative Company Analysis, and a Glossary of terms used in that industry. Both text and data are provided, as are references to additional sources of industry information. Two surveys on each industry are published each year.

The 51 Standard & Poor's Industry Surveys reports are available for purchase from Standard & Poor's Central Inquiry Department by telephone at 212-438-7760, or via e-mail to Central-Inquiry-Unit@standardandpoors.com.

Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP), provides independent financial information, analytical services, and credit ratings to the world's financial markets. Among the company's many products are the S&P; 1200, the premier global equity performance benchmark, the S&P; 500, the premier U.S. portfolio index, and credit ratings on more than 220,000 securities and funds worldwide. With more than 5,000 employees located in 18 countries, Standard & Poor's is an integral part of the global financial infrastructure. For more information, visit http://www.standardandpoors.com .
 

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