One on One with Fadel Gheit of Oppenheimer
Wednesday, June 27, 2007
|
|
|
|
SUSIE GHARIB: There was an unwelcome surprise today in the government's weekly look at energy supplies: a drop in gasoline inventories. The Energy Department said gas supplies were down by 700,000 barrels last week. Analysts had expected a rise of more than a million barrels. Stockpiles of crude oil rose by 1.6 million barrels. That slide in gasoline stocks helped send crude prices higher. In trading in New York today, light sweet crude for August delivery jumped $1.20 to $68.97.
Now, all this comes amid turmoil in Venezuela, home to some of the world's largest oil deposits. ConocoPhillips and ExxonMobil said yesterday they refuse to pump oil under tougher terms with Venezuela's government. A short while ago, I talked with one of Wall Street's top oil analysts, Fadel Gheit of Oppenheimer and asked him who stands to lose the most from leaving Venezuela, Conoco or Exxon?
FADEL GHEIT, OIL ANALYST, OPPENHEIMER & CO.: ConocoPhillips have a lot more to lose than ExxonMobil. Relative to its size, the Venezuelan assets represent the bigger portion of the total assets than Exxon.
GHARIB: Fadel, how will this new development in Venezuela impact American consumers? Will it result in supply shortages or higher gasoline prices?
GHEIT: Well, it might. Number one, it will definitely reduce the capital outlays by oil companies, because of the restrictions countries like Venezuela and Russia are putting on them. So, less capital investment by oil companies means less oil will be produced and that will tighten the markets. Eventually or potentially, it could have an impact.
GHARIB: Now, ConocoPhillips said that it's considering legal arbitration with Venezuela. What does the company hope to achieve through this arbitration and will it be successful?
GHEIT: Well, ConocoPhillips and Exxon both rejected the settlements that were offered by the Venezuelan government. They have a contract and their assets were seized, and they did not fight that too much, but the compensation now is at issue. ConocoPhillips has $4.5 billion investment in Venezuela and they need to obviously get compensated for that. The last resort is going to be going to an international court and they are likely to win judgment and Venezuela has (INAUDIBLE) basically put a lien on these assets, solve them (ph) and get their money back.
GHARIB: How about ExxonMobil? Do you think they're also going to go after legal arbitration?
GHEIT: Absolutely. ExxonMobil wants to make sure that that -- not to set a precedent so every other country will take advantage of what Venezuela is doing is and will do the same thing. They have to make sure that contracts are respected and they operate in a business environment where there are rules and regulations and both parties have to observe these rules and regulations.
GHARIB: Well even so, do you think that the governments of other oil- rich countries will follow what Venezuela has done, do something similar?
GHEIT: Well, Venezuela was not the first one to do that, actually, it started with Russia. You know, countries have taken advantage of rising oil pricing, tight supply, the demand is rising, so they are in the driver's seat. So, right now the power has shifted from the major integrated oil companies into the hands of the state oil companies and they are exercising this new power and putting unreasonable terms on major oil companies.
GHARIB: As you look around the world, what other oil-rich country might follow Venezuela's actions?
GHEIT: Well, we're already seeing what is happening in Russia, confiscating assets from BP and Shell and now Venezuela and Hugo Chavez, the president of Venezuela is going preaching the Chavez doctrine throughout Latin America and we have seen that in Peru and other countries, but it's a trend. And unfortunately higher oil prices happen to be a two- way street and it is not all simple and easy for large oil companies. They're under pressure from their own government as well as the host governments who want more share of these revenues.
GHARIB: Fadel, we have about 30 seconds left and I want your outlook on out prices because they rose sharply today on that government inventory report. Where do they go from here?
GHEIT: We're going to see volatility, but I think oil prices will be very close to $70, barring any major international crisis. I think oil prices will be very close to where we are now.
GHARIB: All right. Fadel, thank you very much for your thoughts.
GHEIT: OK. Thank you.
