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WTI Crude Crashes Below $70 For First Time Since June 2010
Houston, we have a problem...
Lowest since June 2010...
At $70/barrel, the US Shale industry "does not work"...
And don't expect help from the Saudis...
"Why should Saudi Arabia cut? The U.S. is a big producer too now. Should they cut?"
* * *
And the Russian Ruble is in freefall
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No, DOW has a problem...
Race to the Bottom. which will lose 50% first ? SHINING GOLD or BLACK GOLD ? or BIT GOLD ?
Damn shame I haven't "got it together" enough to buy a few barrels. I can wait.
Shhhh..... Don't tell anyone. (I have a few barrels of crude stashed in my basement.)
I had some oil but I gave it to my friend and he lost it in a boating accid- hang on! Oil FLOATS!!!
dont worry....yellen is being briefed on how to fix this
Obama is going to milk this with this "low gas prices = good for economy" BS
I will wait for the S&P to follow Gold and Oil's drop from their respective highs real soon.
Last time we saw this in Aug 2008, Fannie and Lehman went down the next month.
We have a "problem" alright. Prepare for impact.
Chat_noir needs a lesson in counter-party risk and debt defaults.
If one were long Exxon, WTI Jan futures, or worse, Burlington Northern, may I introduce you to a time worn traditional term some of us speculators love to use:
Plunger Rape.
Enjoy.
I'm sure some algorithm will keep chevron and Exxon from trading lower
I'm sure some algorithm will keep chevron and Exxon from trading lower
Corexit!
Made get some good deals on condoms here too.
I'm pretty sure "tanks on the ground" in Europe will help those poor gas companies shortly...
So this means cheaper fuel at the bowser, right? Right? RIGHT???
But, but, but, but peak oil???!!!
Even if gold drops down another 15% or so, ( as hard as it is to imagine 1000 dollar gold, I'd keep some dry powder) this will significantly drop the cost per ounce of digging it out of the ground, as fuel is a major factor in their all-in cost. This could remove a lot of overhead from the miners, helping out their bottom line. (Not really getting my hopes up. Just wishful thinking...)
so the supply of gold will increase, it will weigh on gold prices even more.
One can only hope.
DavidC
Sweet. Would love to see gas hit 1,20€ for 95.
Keep it coming baby!
ok this is a funny comment
1.20€ is the taxation on it so it can't.
Here in Germany the shit taxes on the Gas is 0,88€ per liter, so that would mean a raw gas price of 0,34€ per liter before taxes.
Although in Spain I couldn't tell you what the gas taxes are.
I don't work so I don't use gas so I don't care?
Falling knife.... - 40% ...feeeeuck
Can anyone explain to me why all these talking heads are saying that low oil prices are a BAD thing? Other than the "shale revolution" falling apart?
The shale "revolution" falls apart -> a major decrease in US oil production + a junk bond crisis (at a minimum)
Yeah.
And anyone who doesn't think that shale is a bubble as far as hot money capital flows goes , is a fool.
US recovery was totally based on energy and software. Software, as proven by social media "blue chips" like Facebook and Twitter are largely based on tax arbritrage and accounting fraud with how eyeballs & users are tracked and revenues are accounted for. Corporate profits were based on paper transactions which have zero PP&E or physical collateral.
We are looking now at a 87 style balance sheet recession, which implies a forward job loss of about 10,000 energy jobs in the field, and I suspect a casual blush rate of 4,000 layoffs in upstream/corporate white collar by 2017. Now go look at where the luxury US growth was, hint: it was not florida or Los Angles. Now look at which sectors are in favor in the US: Retail and marginal spending (or marketing platforms).
If a bottom up explanation was too hard for you to grasp, just look at what energy CAPEX was a component of for sp500 and rus2000. Now look at what energy was as a weight of HYG indexes and the sp500 growth (deduct for buybacks). If you look at this pullback, then we are expecting a 20% pullback in SPX energy.... or about 7% SPX 500 decline just on the simple pass thru of EPS pullback. So lets now throw energy service companies into that, and for rough math assume thats an additional hit of 10% for simple math we are looking at a easy 15% correction. Add in a few HYG restructuring events ? Which are always bullish as proven by LEH and Countrywide..... and voila: we got a real fun time.
Of course, none of this matters. SPX is at global highs and the retail consumer is loving cheap prices. Deflation is healthy for the economy, it lets people spend more. The only problem is if everyone is in energy, or an energy sector.... that whole discretionary income thing falls apart. Also, if your economy is based totally on selling to those energy guys who actually produce fixed capital vs. buybacks or share-exchange schemes, well, you get a huge problem. So expect guys like the US homebuilders who were growing on Texas growth as their only data point for leverage, forward earnings hype, or automotives which were relying on fleet sales for US short-trucks... (read: General Motors and most of the US institutional players), that huge problem just became a massive inventory and buyback sustainability disaster.
great summation aVileRat
HY weakness eventually leading to default cycle will start at shale/marginal E&P core then spread to service names then ultimatley to periphery that supplies service industry. Will it cause contagion in the whole HY space or due to excess liquidity floating around will it be delayed and cause a rolling crash in each sector? We shall see.
Can't wait for Republican congress attempt to produce a bill to assist flailing energy industry. That will be cute.
look to Texas (Houston) for an idea. lower energy costs will lead to a bust, ala 1986. the Texas (Houston) economy will shrink, taking the booming housing market with it. i suspect that we will see the same thing in the fracking North. our economy is dancing on a knife's edge already. won't take much to push it over. lower energy prices is nice, espceially for the working poor but the economic slowdown will hurt. http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP
Sure, that industry will suffer, but dont lower energy prices open the door for new or other industries to thrive?
Uhaul should make out like bandits.
What other industries exactly? The point is, the price has dropped below the brake even point for many companies and it looks like it is going to drop further. This means that companies who were already taking on debt at $100/bbl are going to be completely and totally fucked. Their production will go off line at these prices. You're talking about removing some of the supply of something that is a keystone commodity for our economy, and potentially causing another major financial crisis when the investors who bought the associated junk bonds get fucked. How many CDSs are there on this shit?
In a free market, maybe... But, we haven't had one of those in a few generations.
I'm still curious as to what industry he's talking about. This is going to take a large chunk of US oil production offline. What industry is waiting in the wings that doesn't depend heavily on oil? Not the paper BS that is traded, but the actual physical product?
We could start a Brent Crude Oil Challenge i dont know. But seriously, how about all the industries that will benefit from lower oil prices? All shipping companies, FedEx, UPS, airlines? Greyhound? Diesel Trains?
Gas at $1.98/gal is not all that cool if you pull up to a pump and it says $1.98, but the pump is empty. That's the point. Oil is being priced below costs that justify its production, which means that we're going to see a contraction in supply. If the price keeps on being artificially suppressed, there will be shortages. Oil will be cheap, when you can get it. If not, then too bad. How much money is Greyhound making if diesel is $2.20/gal, but when it pulls up to the pump, it cannot fill up? To make it worse, a lot of the frackers have been fracking on debt. They've been selling junk bonds. This is just another potential financial crisis in the waiting. If we could produce 25 million bpd at $30/bbl, our economy would be banging, but we cannot. If this trend keeps up, we'll be finding out that we cannot produce 18-19 million bpd at $60.
This is what you face with central planning and manipulated markets, although I expect that, should reality rear its head, there will be a reversal in the price trend AFTER some of our supply has been taken off line. Or some subsidies, which would just be another can kicking maneuver.
OK, now I'm reading some "way out" shit.
GAS cannot ever be prived below supply costs over time, even if supply costs are skewed across the spectrum,. the price will always follow demand of the most expensive last gallon purchased and absolutely required by the consumer.
Will this affect the cowboys?
panem et circenses
Who's going to blink first?
Saudi's sound pretty resilient on this one!
SHALE-annnnnd it's gone. Next.
Nope. Neptune in Pisces = oil & gas found everywhere, by everybody.
How come no commentator in the west ever mentions the liklihood that the US and Saudi Arabia are in cahoots to bring Russia to its knees with this stunt? Rest assured the Saudis will want big favors in return...like the most modern weapons.
Big oil and high finance run the f...in world.
The price of oil has dropped what, 40% in the past 6 months? Rouble/dollar has declined 36% in past 6 months. If you are a Russian producing oil and buying USD goods/services, you are getting a dry ass-pounding. Putin's going to be personally shutting off the natural gas lines to Europe, and he'll likely order his tanks into a new territory. I hope he says he's doing it for the people's safety . . .
So, just one more reason to abandon the petrodollar?
Yes, but there is not a good alternative. The yuan is still pegged to the USD, even if it is appreciating modestly. China would be happy to trade copper or steel for Russian oil, but I'm not sure Russia needs those commodities.
Depends if Russian gas/oil contracts are denominated in Roubles or USD/EUR/GBP/CHF, if you're going to trade in bullshit fiat you might as well trade in the best bullshit fiat.
Or an invasion of syria.
forcing the COMEX to default might be a nice reply
In my short lifetime, I have noticed that anytime the smaller guys own something that starts making them some money (in this case the frackers) that segment of the market will crash. The smaller guys will go bankrupt while the big corporations and banks pick up their assets for pennies.
Isn't that what America/capitalism is all 'bout?
Speaking of :
Everyone have a safe warm holiday
ekm:
Golf clap buddy. You called this a long time ago. I really disagree with some of your posts, but you got this right.
He's been calling the price collapse for March '14. A bit early but the right call nonetheless. Now what about his ideas that Pentagon will usurp Wall Street? Is America going to experience a takeover by the military?
Most Banana Republics do get taken over by their military
u s a so?
Well I did say I really disagree with some of his ideas. Particularly his love of the Pentagon.
:-)
I am being a realist.
I can't change anything, whether I loved (which I do) or hated Pentagon, it won't change anything.
I am only analysing.
There is a long way to go before we see $20 Oil, which is what he forecast.
I forecast $60 Oil and $1000 Gold.
If we get a Financial Collapse in the magnitude of the Lehman-AIG mess, then, I will change that forecast to $30 Oil and $700 Gold.
Even the Saudis are not that suicidal. They can hold at $60 and have THREE YEARS of RESERVES to maintain their Social Programs. At $30 Oil those Reserves decrease to ONE AND A HALF YEARS.
At $10 Oil they are bankrupt in 6 months.
(That is a simple extrapolation. I am certain that the time frmes are not exact. But you get the idea. Their economy is 100% Dependent upon Oil Revenues.)
Crude is at 68 and change right now. You might hit your target of 60 by the end of the week.
It will not happen that fast.
Besides I do not expect such a precipituous drop off in Gold Price to $1000.
Next Gold Target is at $1130.
Silver will revisit $9 before this is through.
(This is temporary...a buying opportunity. Deflation precedes the Hyperinflation. The Fed will panic and print.)
Price of silver goes to $9, you probably wont be able to buy any physical. At least that was my experience in 2008. Nobody had any available and if they did, they wanted $12 to $14 an ounce.
Gold has been leading the way in this collapse. Oil is just catching up. The old saying "gold knows something" is true again.
When gold starts going up, the tide will lift all boats.
Gold is real money and the first asset to indicate which way the wind blows.
At what price will this print at capitulation?
You know it's gonna happen soon
Margin call Friday....I say Tuesday open for a bounce.
No PPT on Oil
Tom,
Good morning.
Please, you're a mathematician. You need to revise your extrapolation because the next financial meltdown is gonna make 2008/2009 a walk in the park.
I am talking collapse of the banking system and many currencies. And TPTB and Western massmedia will blame the Russians.
Life, as we know, is about to end.
Additional Reading
Unprepared Society: Planning for a Precarious Future by Donald Michael
The Death of Money: The Coming Collapse of the International Monetary System by James Rickards
I hope Donald Michael and Jim Rickards are selling a lot of these books. they both need some cash to cover their margin calls on leveraged long gold positions.
I could care less about gold, and their stupid (gamble/parasite speculation) leverage.
I care about energy (depleting) and complexities (meaningless solutions).
Invest in uranium,thorium or heavy water activities, the western world has the sources and technology to advance the nuclear/electric revolution, and limit their/our need for oil. Just think, 1.69 gas again and V12's that get your car moving quickly. The Arabs have smashed California's good intentions to make cars underpowered to forstall global warming, when nuclear/electricity is the answer, and soon fission, if Locheed or Russia turns on the money to make them real, faster. This is a new "go to the moon" project that the US can lead in and show the world we are not just militarists. Then the mining people will advance too, in technology as the techniques are improved and honed. We need commodities, to have the "good life", can't burn paper (fiat money) in our gas tanks and furnaces. So Mid East (aka Arabs), your time is up and we are not going to waste any more of our treasure and blood, on your wickedness. The freedom bells are ringing again, as we give up our addiction to oil supplied by the shieks and their partners, and become self-suficient again. Thanks for this Xmas gift, GOD! A new direction, away from WAR!!!
Even if they start burning forex reserves to fund the social programmes they can always issue debt. Would you rather buy the bonds of a resource rich state (Saudi) or the one of a debt rich state (anyone in Europe)? They can probably ride out a commodity price drop longer than an over leveraged western hedge funds/banks.
Outside the fantasy land of governement finance and hedge funds low oil prices are good for the real economy.
Humbled. Thank you.
Happy Thanksgiving.
It might be a good time to start considering diversifying a portfolio over weighted with the metals into something more balanced between the metals and oil. Just thinking out loud.
Into what? Something about jumping out of a frying pan comes to mind. No easy choices. I am just glad to have an income at this point.
>> Into what?
For me, out of some metals and into some energy plays. I'm not saying the metals are as good as anything at this point but I'm, by most accounts, foolishly over weighted. Moving a little out of my beaten down metals and into some freshly beaten down energy plays at least diversifies me.
>> I am just glad to have an income at this point.
That's something I have virtually none of, with the exception of a $50K 6% first mtg on my previous property. Other than that I've been living on principal for the last four years. I can continue on at this burn rate indefinitely, and that's one reason I decided to bail on the "system", but a little diversity wouldn't hurt my feelings.
commodities tanking, USD rocketing, global economy shrinking, but alas, stock markets go higher
because yellen won't stop buying TFATH!!!!!
yellen is keeping markets up to save pensions - pensions can't exit or markets will tank
get the Orville Redenbacher for Friday and next week!!!!
I saw a video of Yellen walking beside a few people the other day, good Lord is she disgusting looking in real time. I thought photos were bad enough, but they dont quite do justice to what a hideous looking gnome she really is. The top of her head was at everyone elses belt.
Yep. If the top of her head was flat you could put your beer on it while she blows you
still, 10 ozs...
You first.
On getting the Yellen BJ, that is.
How many ounces of gold would it take for you to munch on her box?
I'm thinkin' 10 ozs
She looks like she smells like mildew.
If this continues, expect to see a lot of Uhaul vans heading out of North Dakota.
and, in Canada, Alberta
Heading to the state with the most generous welfare benefits. New York City has great bennies. Medicaid even covers teeth sealing.
at least gas will be cheap on the drive out!
If CVX drops to under a bill I'm a buyer. Oil majors will ride any currency reset. Hard assets and whatnot.
Your move Vlad... the Comex is asking for it and oh boy just look at those GOFO rates.
I'm starting to think the Chinese are behind all of this - it hurts both the USA and Russia which weakens the US and pushes Russia towards China.
Look for the Saudis to eventually price Oil in Yuan next...
The TRUTH...which is NOT BEING REPORTED...is that the USA is in VIOLATION with the 1973 Oil Agreement that we penned with the Saudis.
We agreed NOT to burn any domestic Oil in the USA...ANY.
In fact the Prudhoe Bay Reserves were shipped to Japan.
The word of the United States and her treaties are WORTHLESS.
Saudi Arabia is REACTING to OUR violation.
Why the fuck we ever agreed to something like that is another question worth considering.
Well Bush Snr promised Gorby in Malta handshake never to let NATO take over those ex-USSR satrapies (excluding E. Germany). We know how that ended once Clinton found the justification for NATO meddling (thanks to Milosevic) in Serbia in 1996. As follow on they gave NAto status to the Baltics and Poland.
Brzez was happy and the chess game on !
Treaties or promises are made to be broken especially if unwritten.
They never followed on to Salt nuclear freeze treaties either; in spite of promises, promises.
Now they bitch about Iran and N. Korea!
Who says we did?
Oh right. Someone on ZH, so it must be true.
Tall Tom, I disagree,
Alaska was not allowed to export any oil that came from Prudhoe, It was for domestic consumption only. Still that way as far as I know.
The big oil is screwing the state with royalties that are a joke, while Exxon still hasn't payed for the spill.
Just another way the Alaskans get fucked every day by the lower 48. Alaska does not need the continental US, any more than
Texas does. When Ak, tried to sedede in the 80's the leader ended up in a gravel pit near Fairbanks.
"Tall Tom, I disagree,"
When someone states something as fact that simply isn't true, I think MOCKERY and DERISION are more in order.
after correcting their "facts" of course.
cartoon fred
shot Joe Vogler...
"the USA is in VIOLATION with the 1973 Oil Agreement that we penned with the Saudis."
First I've heard of it. Reference please.
"In fact the Prudhoe Bay Reserves were shipped to Japan."
http://www.eia.gov/tools/faqs/faq.cfm?id=35&t=6
"Most Alaskan crude oil has gone to refineries in Alaska, California, Hawaii, and Washington. Relatively small amounts have been shipped to Puerto Rico, the U.S. Virgin Islands, and foreign countries.
Export of crude oil transported in the Trans-Alaska Pipeline System was banned until 1996. Between 1996 and 2004, nearly 95.49 million barrels of crude oil, equal to 2.7% of Alaskan production during that period, was exported to foreign countries. As of April 2014, no Alaskan oil has been exported since 2004."
So, do you just make shit up as you go along, or did someone in a bar once tell you that?
Tom:
Oil is a fungible commodity. It makes no sense to ship it any farther than necessary. Why ship oil from the middle east to Japan when we can ship oil from the USA to Japan and the middle east can ship oil to the USA.
that debt really looks its invested with Fergusonians with a few police guys...men in white !
What a bubble it looks like trouble ! I hope that debt gets shot down fast!
Pick your side; black or white? Its all debt and its hidden under the drill baby drill carpet !
(No kidding, but I do see Sarah Palin shedding a tear for the drillers if this goes belly up! )
In theory, the US could announce it was extending an industry-wide strategic national interest financial lifeline to all the shale producers, including a willingness to exchange their debt for Treasuries. It would be de facto a massive public work project, and it would create more jobs, improve US trade deficit, and reduce the straetgic importance of the sandbox. It would also keep Russia on the ropes, and make the dunecoons think hard about which to sponsor first: (1) welfare for their citizens or (2) anti-US terrorism. Call it QE with a shovel included.
Here is a typical shale well see how much money it made in the last year, figure it cost $10m to complete, how is it doing? How will it be doing at $50/bbl oil? Hint, still making a profit.
http://tinyurl.com/ng7ctgv
And notice the production drop off after one year. Gas down 26%, condensate down 55%. An exercise for the reader: given current prices, how many identical wells must be completed this year in order to match last year's cash flow?
Your clearly expecting another know it all trader to think beyond the HFT millisecond "price is truth" about actual INVESTMENT with multI year payback periods. Our "market" only deals with the immediate, so we'll understand as everything collapses and not before.
Time to refill the national strategic oil reserve
Shale is the strategic reserve.
If I were Soros or Berkshire Hathaway I would organise a massive short and get it to fall to 40 and then go long...
When you have 50 billion to play with, you can only win and never lose, whatever your margin call !
Buffett killed the pipeline deal for as long as he could. Thought he could literally ride the oil gravy train forever.
Lower oil prices means lower demand also for oil in rail cars.
Rail cos. are looking much weaker as a result. Coal and oil trains were the biggest plays. Containers and cars are no longer filling up trains. Grains will for a bit longer but that will slow down as well.
Don't worry ... BIG OIL will be too big to FAIL ! tax payers will bail them out, somehow
Its All RIGGED
Have a happy THANKSGIVING
Oh almost forgot... FUCK YOU OBAMA ASSHOLE !!
Everyone knows the oil market is rigged... ... .... get it... rigged... *bada bum tss*
Picking up grandma in the motorhome shortly and driving the wife/kids to the Thanksgiving party in style at 8 MPG now that gas is $2.73 who cares?
I'm sure happy that I never gave up that V10 Excursion Eddie Bauer. Picked it up cheap in '08 in lieu of material cost. I don't collect cars per se but will take cars as payment. Will take pieces of art and other "shiny" stuff as well... but that's a whole 'nother story for another day.
Excursion is mostly parked now in the barn under tarp and just for special occasions and when gas is cheap.
Of course none of this would be an issue or even feasible if the world economy was truly recovering and growing leaps and bounds.
I'm sick and tired of the shills and their lies and propaganda. The economy is crap. Too many people who had good paying jobs are either not working or they're making not nearly enough to participate.
Then the whole QE fuckup which added to the bottom lines of the elite who doesn't know where to stuff their wealth. Nothing trickled down unless you want to consider the increased employment at Maserati or Bentley.
Here we are, 5 years after the crash which was supposedly triggered by massive misallocation of capital into a subprime real estate lending sector. The money dried up and the global economy tanked. Five years into it and more massiver misallocations of capital and commodities are tanking across the board because demand is just not there.
The rich guy can only eat enough for one person, can only drive one car at a time, can only sleep in one bed at a time and can only wear one pair of pants one at a time.
Unless wealth is spread widely across the population and people will have an incentive to show up for work, there is no way an economy can grow.
Why show up to work for $10 or even $15 an hour and 40 hours of slave labor a week when you see jackasses driving around in Bugattis or Bentleys who haven't worked a single day in their lives?
Powderkeg meet spark soon.
When you hear a first class power schmuck like Schumer publicly whining about his parties mistakes, you know all is not well in the Magic Feifdumb.
Someone has to be asking how much longer can we pretend everything is just rosey before we get hung.
But isn't that what the US is mostly about? Pretention? Hollywood propaganda garbage 24/7 telling people how wonderful it is to be an American when more and more people realize it just is not so great? Americans like to pretend how great they are and how magnificent their country is. Well, it is not and latest examples of Ferguson are only confirming what people outside the US already know.
On the surface it's all shiny and glamorous and beneath the cries and moans from a paranoid and oppressed population. A population that is medicated and self medicated to keep up, able to sleep and able to cope with life.
When the TVs stop working and the drugs are no longer available, the shit storm will finally come to the surface.
You get the picture.
Actually, I once knew a rich guy who wore two pairs of pants.
the squids wear 4!
War bitchez
Thar she blows!
The Russians and the US oil industry appear to have a common enemy in the Middle East.
The current level of war in that region of the world seems inadequate to meet their needs.
If the ISIS problem were to spread to the Saudi oil fields then there would likely be a cut in OPEC production.
With Russian and American help to recapture the Saudi oil assets there would likely be some collateral damage to the Saudi oil infrastructure, which could impair Saudi's oil production for several years.
Who wins? Whoever buys the temporarily distressed American shale oil industry stocks, whoever invests in weapons that will be needed in the conflict, and of course the bankers because they always win.
Many years ago, maybe before 2000, I saw an interview with a Saudi big wig on TV like CNBC, speak of their minimum price they think was fair for their oil, like $75. and thus it must have been considered with their US protectors, that this is what they could live with in certain cases, but more would be optimal. Are the Saudi's angry at the US for not prosecuting the Syrian President, or are they pleading to the US for more protection, like from ISIS who are Suni-like, but not so much, that Wahhabism is their favorite color, and the Saudi's way of bowing to the Christian US to make a market for their precious oil. So it looks like the US is using the Saudi's to wage economic war on the Russians and break them. HA HA HA, doesn't anyone remember Stalingrad and the German efforts to capture the city and the resistance the Russian people put up. The Germans broke themselves with this effort and likewise the US will pay the same price. The Russians had peoples' country loyalty and the weather on their side, and Germany had military superiority and still lost. People and natural forces always seem to be the survivors or winners in these type of contests. Russia isn't going to waste their time or money on phsically destructive weapons, but those that destroy a country's economic system, like select internet bombs that close the stock market or destroy banks data-bases that track the wealth of the public in $'s or shares. Too bad for us, except those who hold gold in a safe place like London? No, like Switzerland, if they pass the referendum and become sensible again and trustwothy to the rest of the world, which many countries can no longer do because of past mistakes and greed. Russia is not so internet dependent as the US is and therefore the US will suffer emmensly for their technology based economic system How can one not see that the rarest and most beautiful metal on earth is superior to a piece of paper who says in God we trust and are issued by so Godless in their greedy actions to others of Europe and the third world.
Russia is a tough nut to crack for sure but it wasn't just Russian will and nationalism that broke the German's march East. Russia had a formidable artillery and when Russia received US funding to fight Germany, the war was decided.
WW2 was about the control of oil and to stop the advance of communism across Europe. Initially Hitler was built up and financed by US bankers to fight Russia. Then Russia was financed to fight Hitler. Both took the money, signed the loans and made their deals with the devil.
Millions of good men died for nothing but a few pieces of paper their governments signed. The war loans were signed with the blood of millions.
How can we ever forgive this to those banking families?
The Saudis only answer to their own interests. There was a time when the Saudi monkey on TV said $40 was the fair price. Over time, that 'fair price' more than doubled, just as the Saudi welfare system required a higher budget. The US-Saudi alliance was never rock-solid. The Saudis want US military support, and the US wanted oil. Shale changes this as does the rise of China as the #1 oil consumer and global military power. Today, both the US and Saudi Arabia need each other less. Coincidentally, the US wants to hurt Russia, and Saudi will go along, as that would lead to less non-OPEC production. This is a mere convenience, not a necessity.
Oh, and the Germans only had East front superiority versus Russia for the first 6 months of Barbarossa. Hitler got stupid (wanted to take Stalingrad only b/c it was named Stalingrad) and greedy (split his armored force to pursue the Baku oil fields). I suspect he felt like his armor was still vastly superior to the Russians, but it wasnt, at least not uniformly across that front. By year 2 of the Eastern campaign, the German armored divisions were slightly outgunned unit-for-unit by the Russians. Also, the Luftwaffe was outnumbered by year 2 of Barbarossa. So their military superiority was very fleeting, and only a narcissist like Hitler would have even attempted the invasion of Russia. Instead, he should have continue to pound the RAF fighter bases and execute Operation Sea Lion. Eastern action should have been limited to appointing a Rommel to defensive wall construction. The Russians knew war with Germany was looming, but Stalin was deathly afraid of this in 1941. Given this initial point, I suspect Stalin would have required 18 months to feel prepared to attack Germany, and it may have been possible to buy him off termporarily via land concession. Hitler's rocket and jet engine technology were conventional war game-changers, had they been allowed 12-18 months to mature. Of course, Hitler wasn't rational. And we might have had a global nuclear conflict, too.
nice OT summary of Hitler's military folly, in a succint little paragraph :)
Thank god the oil price is not a leading economic indicator.
Oil is trading back to it's generational mean.
If you think that this oil price drop is probably going to be short lived, lots of current (US/Canadian) production requires prices above US$60 so will go offline and tighten supply, its worth going long NOK, right? NOKUSD has lost around 14%, and 5% against EUR/GBP in the last 6 months.
SO, I hear over and over again about how the breakeven price of a lot of these fields is 80 barrel.
However, deflationary winds are a blowing!
SO, what is the biggest input cost of extraction?
Labor? Wages are falling
Energy? Prices are falling
Equipment? Prices are falling on big equipment (I am pretty sure)
That mud stuff? (Don't know shit about that )
Debt service? As-IF ZIRP is going to stop? We will have real negitive rates soon enough! (already have negitive rates in reality)
AS oil prices fall, oil production costs will fall as well. What's going to happen is that the weak oil plays are going to get shaken out leaving the best plays and players in the market, who will continue to churn-out the oil at whatever the price falls to. POSSIBLY there will be debt restructure as the weak hands get crushed.
Where am I wrong here? Please enlighten me, thanks!
Spot on.
Spot on x 2. The only group freaked about declining price of oil are those that have levered up to make a play in the oil market. .... which is no different from somebody buying a shack that they can't afford thinking interest rates will never rise....is the same as simply being on the wrong side of the trade.
Uncertainty's a bitch.
I have to live with the insanity of ZIRP. So too should they.
Somebody needs to remind these fuckers that in the absence of ZIRP, prices would be stable. .... predictable.....
They gambled. They lost. TFB.
Peak Finance makes the point I've been making right along. With deflation, costs goes down, so the argument that "fracking doesn't work below $80," should be reflagged as "fracking doesn't work below $80 as currently structured."
Problem: Losing money at $80 per barrel.
Costs per barrel (humor me):
Equip. $20
Labor $25
Debt: $25
Transportation: $10
Misc: $10
Solution? restructure. Lots of $$$ floating around, don't cha know?
New structure (after bankruptcy, etc.):
Equip. $0 paid in cash
Labor $20
Debt: $0 paid in cash
Transportation: $8
Misc: $8
New break-even: $36 per barrel. Anything above that is gravy and replenishes cash position, plus, all that was covered by cash settlement is amortized, i.e., lower tax rate.
This isn't rocket science. It's money games.
Spot on x 2. The only group freaked about declining price of oil are those that have levered up to make a play in the oil market. .... which is no different from somebody buying a shack that they can't afford thinking interest rates will never rise....is the same as simply being on the wrong side of the trade.
Uncertainty's a bitch.
I have to live with the insanity of ZIRP. So too should they.
Somebody needs to remind these fuckers that in the absence of ZIRP, prices would be stable. .... predictable.....
They gambled. They lost. TFB.
I respectfully disagree with some of the ZH assertions that break-even $WTIC is $80 or whatever and that price will immediately recover because supply will immediately shut in.
Bullshit.
This is a demand problem plain and simple. And in a deflationary environment the price of all things fall - including land, labor, and capital. This is what is supposed to happen in a Austrian correction boom bust cycle. It simply goes like this - just like it did in 1980 when i seen oil rigs just laying in the ditches when price collapsed - assets will be exchanged for $0.10 on the dollar as the levered shale players default. New shale operator will resume with zero debt servicing costs. Labor and lease rates will also be less. Profitability resumes at $60 - and so on because debt and demand is the problem - not supply.
Of course Janet will start buying futures contracts to try and put price supports or a floor on the product but because demand is a function of quantity and not so much about price - it won't matter - because solvency depends on receipts and receipts depend on volume sold (delivered). Right now you can swing a baseball bat and hit oil particles.
Oil prices can decline for a lot longer and further than most people think, in my opinion. Happy Thanks giving ZH'ers!!
The best plays will survive ? Sure, assuming the deflation doesn't drop below even their breakeven level. Prices can fall, costs can fall, all true, but the question is whether the level of demand is actually high enough to meet those levels.
Who the hell knows anymore where the actual floor is?
Oil will no longer be the "gold" of economic power, but will revert to it's place as something to burn until there is no more, or that which is cheap enough to burn. Face it world, GOLD is "gold" and you can't burn it like oil which will soon disappear. The world needs a reference material (Gold) to rely on for wealth transfer. As nuclear is the role of energy transfer, the Iranists see the writing on the wall and would like to be part of the mid-east participation in nuclear/electric revolution, and not just Isreal. They are letting the oil companies waste their money on a losing technology as we finally chose to progress in our energy and energy use, policies. BIG OIL is now CHEAP OIL that is endangering our normal climate cycles. Let Mother Nature be the ruler of climate change with the help of uranium, thorium and fission,
Oil will no longer be the "gold" of economic power, but will revert to it's place as something to burn until there is no more, or that which is cheap enough to burn. Face it world, GOLD is "gold" and you can't burn it like oil which will soon disappear. The world needs a reference material (Gold) to rely on for wealth transfer. As nuclear is the role of energy transfer, the Iranists see the writing on the wall and would like to be part of the mid-east participation in nuclear/electric revolution, and not just Isreal. They are letting the oil companies waste their money on a losing technology as we finally choose to progress in our energy and energy use, policies. BIG OIL is now CHEAP OIL that is endangering our normal climate cycles. Let Mother Nature be the ruler of climate change with the help of uranium, thorium and fission,
Oil will no longer be the "gold" of economic power, but will revert to it's place as something to burn until there is no more, or that which is cheap enough to burn. Face it world, GOLD is "gold" and you can't burn it like oil which will soon disappear. The world needs a reference material (Gold) to rely on for wealth transfer. As nuclear is the role of energy transfer, the Iranists see the writing on the wall and would like to be part of the mid-east participation in nuclear/electric revoluyion, and not just Isreal. They are letting the oil companies waste their money on a losing technology as we finally choose to progress in our energy and energy use, policies. BIG OIL is now CHEAP OIL that is endangering our normal climate cycles. Let Mother Nature be the ruler of climate change with the help of uranium, thorium and fission,
<sarcasm> This must be part of that Fed-driven hyperinflation that's always just around the corner. That dollar debasement is really starting to hurt. </sarcasm>