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S&P says Russia emerging as an alternative to Middle East oil

Standard & Poor's (S&P), the international rating agency, 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

Standard & Poor's (S&P), the international rating agency, 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.

Known for its global financial research and investment analysis S&P said 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," said 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," added Vital.

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