OPEC: Increasing oil output won't help prices

Douglas McIntyre — Thu, 15 Nov 2007 04:45:00 EST

Filed under: International Markets, Forecasts, Bad News, Economic Data, Oil

One of the most novel arguments against raising oil production is that it won't help decrease prices. That may seem counter-intuitive, but it is what the ministers of OPEC want consuming nations to believe.

Algeria's Energy and Mines Minister Chakib Khelil told Reuters, "We have all the factors that impact the price, so if we increase, we are going to have the same phenomenon that happened before, which means, it may not even impact on the price." He may have missed the "supply and demand" lecture in his college economics course.

OPEC has several reasons for not improving supply, but the idea that it will not affect prices is absurd. Just the announcement of improved output from the cartel could cause a stampede of selling in oil futures.

What OPEC does want are guarantees from the big consuming nations, especially China and the U.S., that they will not invest too much in nuclear power and biofuels. The producing nations want to know that there will be oil demand two and three decades out. They are making plenty of money now, but will that continue in 2030?
The attitude being taken by OPEC is that it will not increase output in December. That could cause prices to rise again. But a promise of dialing back alternative energy development that might cut oil demand would almost certainly get more shipments of crude moving.

Douglas A. McIntyre is an editor at 247wallst.com.

OPEC: Increasing oil output won't help prices originally appeared on BloggingStocks on Thu, 15 Nov 2007 04:45:00 EST. Please see our terms for use of feeds.

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Home Depot sheds some dead weight

Kevin Shult — Tue, 19 Jun 2007 15:15:00 EST

Filed under: Deals, Rumors, Competitive Strategy, Wal-Mart (WMT), Home Depot (HD), Lowe's Cos (LOW)

According to sources, Bain Capital, Carlyle Group and Clayton, Dubilier & Rice have won the $10 billion auction for Home Depot's (NYSE: HD) Supply Unit and were finalizing the deal today, Reuters reports.

Several private equity groups had shown interest in HD Supply, which sells business materials, waste water and utility products to municipalities and contractors, but because of the ongoing slump in the U.S. housing market, those firms backed away.

The $10 billion price tag was somewhat lower than some investors and analysts expected, according to Farr Miller's Keith Davis, which owns Home Depot shares. The winning group outbid an offer from Thomas H. Lee Partners and CCMP Capital.

By selling off HD Supply, Home Depot will now be able to better focus on the retail division and its arch competitor, Lowe's (NYSE: LOW). That's something ex-CEO Bob Nardelli failed to realize about the low-margin Supply division throughout his six-year tenure.

With Home Depot's retail unit slumping and the need to get back to basics, I certainly hope management doesn't make any aesthetic changes, similar to Wal-Mart's (NYSE: WMT) change to polo's and khakis. Could you imagine a Home Depot employee in khakis, without his trusty orange apron?

Kevin Shult is a writer for TheFlyOnTheWall.com (subscription required).

Home Depot sheds some dead weight originally appeared on BloggingStocks on Tue, 19 Jun 2007 15:15:00 EST. Please see our terms for use of feeds.

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