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Oil production, inflation & more... - Views on News from Equitymaster
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  • Aug 1, 2008

    Oil production, inflation & more...

    How hard is it to maintain oil production?
    Surely, that's the question the folks at Exxon, the world's largest oil and gas company, must be asking after the company reported nearly a 8% decline in production, the largest in over a decade. The decline can be attributed to nationalisation of its assets in Venezuela, a strike by Nigerian workers and share of output taken by host countries. However, this didn't stop the company from posting record profits. It clocked the largest-ever quarterly profit without one-time gains reported by an US company on the back of spiraling crude prices. With exploration activities in areas such as Russia, Alaska and South China getting increasingly difficult due to political pressures, access to new reserves is getting increasingly difficult. To add to their woes, oil companies find it difficult to raise production from their rapidly ageing existing fields. In fact, in 2007 Exxon's reserves fell the most in over a decade. Something the company is spending US$ 52 m per day to reverse.

    Over the last several years, most global oil companies have had a tough time meeting their production forecasts. It is a similar story with India's premier upstream oil company, ONGC as well. The company produced 6.41 m tonnes (MMT) of crude oil in the first quarter this fiscal, marginally higher than 6.38 MMT produced during the same period last year.

  • Also read- Some breather on the crude prices front?

    Inflation still high at 11.98%
    Inflation for the week ended July 19, 2008 was reported at 11.98%, up from 11.89% in the previous week. This is the highest increase since the current wholesale price index series was started in 1995. The increase is attributed to higher prices of food articles and manufactured products. It may be noted that the Reserve Bank of India (RBI) had raised the repo rate and cash reserve ratio to 9% each earlier this week in a bid to anchor inflation.

  • Also read - Monetary Policy: RBI doesn't give up.

    "Current conditions very tough, but will turn eventually," says Bill Miller
    In his recent letter to investors, Bill Miler, the fund manager from Legg Mason famous for outperforming the S&P 500 for 15 consecutive years quotes Warren Buffett from a recent talk. He mentions that as net savers, we should be happy if stock prices declined a lot more, so we could buy even better bargains.

    Mr. Miller says that he was of the opinion that the toughest markets he had seen was 1989-90, but now thinks the current period is even tougher. He also mentions that the best time to invest is after the markets have had a dismal performance, and the worst time has always been after a long run of excess returns.

  • Also read- Our interview with Dr. Marc Faber



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