About those dropping oil prices – 6
Have a lot of articles to discuss about what’s going on in the energy area. Lots of turmoil and uncertainty at the moment. Here are a few articles, to help get caught up:
12/6 – Economist – Sheikh v Shale – Love the cover illustration! I’ll be rooting for the shale guy in the showdown.
Article gives credit to shale oil for the drop in gas prices and oil prices. Take a bow, all you frackers in Bakken, Eagle Ford, and Permian! A $40 drop in price moves $1.3 trillion a year from producers to consumers. That is a savings of around $800 a year for an average American, or equivalent to a 2% pay raise, according to the article
Goal of the Saudis, as the article and everyone else has already said, is to put the higher cost producers in the US out of business.
Article says the shakeout will be painful, but the future of fracking is quite bright.
My guess is that the firms who survive will pick up the assets of those who go bust for pennies on the dollar and make a double fortune when prices rise.
12/9 – Ambrose Evans-Pritchard at Telegraph – Bank of America sees $50 oil as Opec dies – BofA forsees $50 oil. They also call the OPEC cartel dead after they failed to manipulate prices last week. Actual phrasing from the bank’s commodity chief is
His view is more pessimistic than others I’ve read. He thinks that 15% of shale drillers are losing money now and half will do so at $55.
The bank thinks it will take six months to remove the 1M bopd glut on the market now. Then prices will shoot up in the last half of 2015 to the high $80s.
The market will set prices instead of an oligopolistic cartel.
Bank’s commodity chief calculates this is a trillion dollar boost to the global economy.
12/13 – Russell Gold in Wall Street Journal – How Crude Oil’s Global Collapse Unfolded – A few tidbits: It is a dramatic drop in demand for oil and the forecast for further drops that combined with a surge in production that created the drop in prices. The Saudis aren’t willing for Nigeria (after Nigeria lost 100% of their sales in the U.S.) to start taking away Arab sales to China and the rest of Asia.
Look at the drop in OPEC shipments to the U.S. – 180.6M barrels in 8/08 and 87M barrels in 9/14. That’s a drop of 52%. If you essentially fund your entire national budget from oil sales, that’s gotta’ hurt. Combine that with a drop of somewhere around 50% in price…double ouch.
Check out the article for deep background about the divergence of world demand for oil and the skyrocketing supply from the U.S.
11/29 – Dickinson Press picked up from Journal of Crosby ND – Texas shale boom has familiar tone – The east and west ends of the Eagle Ford shale play are seeing the same developments as Bakken: labor shortage in the trades, labor shortage in general, housing shortage, skyrocketing wages and prices, overstressed infrastructure, and city officials struggling to keep up. The upside of the downside is that dying towns aren’t dying anymore.