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This Oil Thing Is The Real Deal
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
Well! WTI below $50 and Brent below $53 when I start writing this. Who knows where they’ll be by the time I’m finished?! The euro down below $1.20, US stocks flirting with -2%, major European ones off -3%, Italy and Greece over -5%. Welcome to the real world, baby! Didn’t think you’d see it again so soon, did you? Welcome to the world where the Kool-Aid recovery does not reign supreme.
Not that you’re not going to hear that anymore, and 24/7 incessantly so, but there’s no recovery with these oil prices, no matter what anybody says. The damage must be gargantuan by now. Everybody’s invested in oil. Sure, lots of shorts and stuff by now, but that’s not going to do much good. Not for pensions funds, or for governments. This thing will not blow up or over softly.
There’s not an oil major or minor or a producing country left that makes a profit at these prices, and there’s no sign anywhere to be seen that the drop will stop. If this keeps going, someday soon somebody’s going to go to war. Maybe domestically, maybe across a border, but it’ll happen.
There are dozens of regimes out there for whom oil prices have become a huge threat to their powers, their status, their lives, and there are dozens of others waiting in the wings, eager to take over. The move is just too big not to lead to bloodshed.
The eurozone is perceived as a major threat to the global economy, but not necessarily for the right reasons. Sure, that looming Grexit is not good for Brussels, but Germany and its courts might be a bigger issue. Mario Draghi will need to announce something along the lines of a QE-like measure on January 22, but can he even without risking to blow up the whole casino?
What’s more, with oil and the euro where they are, and especially where’s they’re headed, what good would any new Draghi policy do, however big it is? Europe today, like the rest of the world, has bigger problems to deal with than yesterday’s inflation rates.
Oil below $50 and falling is bigger than any other political or economic issue. Remember when they all said low oil prices would boost the economy through higher consumer spending? Heard anything much about that lately?
For western countries like Norway, Britain, Holland, oil and gas producers, the loss in – tax – revenue is debilitating. For US states like North Dakota, Texas, Alaska, it’s worse. These are not the kind of entities that can turn on a dime, they write long term budgets, the same way oil companies do. There’s a time lag in consequences, but that doesn’t mean it’s unwise to be ready to get out of Dodge.
Thing is, prices DO turn on a dime. And now they’re stuck with a zillion broken promises to investors and voters. And while the executives and politicians will at worst get thrown out, the other side of the equation is going to be stuck with the tab. And in order to save their skins, the ‘leaders’ will raise that tab wherever they see fit.
This oil thing is the real deal. There’s no Plunge Protection for that. And for all we know nobody that counts wants any. For all we know the American behind the curtain wizard convention plans to use it to destabilize a whole list of additional countries. And for all we know Russia – and perhaps China- have seen that coming from miles away.
If and when an oil producing (!) nation like Turkmenistan devalues its currency by 19% against the dollar, something’s really amiss, and tectonic plates are shifting in a part of the world where balances were already, and always, delicate. And once plates start shifting, who’s to tell where they will end up?
It’s no longer about which factors bring down oil prices, that’s old news; it’s about what oil prices bring down. You know, the next – logical -step. And they bring down more than anybody seems to be aware of. Good luck with saving a dollar a day on your gasoline bill. The world’s power brokers feel they have it all under control – they don’t, nobody has the means to control the entire world – , and they have no qualms about sacrificing you to get what they want.
The oil price drop is a much bigger event than the US subprime housing crisis, it’s bigger than everything put together that happened in 2008. And this time, central banks are lame sitting ducks. Omnipotence is a harsh mistress. She tends to backfire.
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You mean there's a consequence to malinvestment??? HUH?
Hedge wisely.
Did anyone else hear the magic words 16 min. after the bell on CNBC? "nobody could have seen this..."
Time to turn on the aimbots. That JCP number is going to need a ton of follow up data points from M and other retails to keep this story intact going into a bad period for refiners and seasonal hiring cycles.
Not convinced this is where CBs lose manipulative power.. Still think its planned to harm Russia.
Only Russia, you say.
"Remember when they all said low oil prices would boost the economy through higher consumer spending? Heard anything much about that lately?"
Joe six-pack is definitely being helped here. If he's not spending, he's saving it or buying down debt.
Don't worry Joe six-pack knows what's best for Joe six-pack.
Not you.
And if $50 barrel oil doesn't do it, then lets try $30 barrel oil.
K?
I feel so bad for the herd corralling themselves into a mania... Not.
It'll be a cold day in hell when low oil prices start to hurt me as a regular consumer. Though perhaps this could trigger the big one and we can finally get our collapse+reset on.
Agreed. These low prices are looking good from my standpoint. $27 today to fill up my tank. Fat cats making calls on oil plays and losing their asses can go shit in their hat for all I care.
I think you give regular consumers too much credit (pardon the pun) on what they'll do with the extra $15 per tank of gas they're saving. In Australia, we're saving, in some cities, 50c/L on gas, but that's only going straight to higher costsfor electricity, gas, water, food, health insurance, car insurance, car registration, licence fees, rent, mortgage and whatever else people can increase the prices of.
I would assume people in the US are probably in a similar situation.
I love it when people try to assert this price drop is due to the market and not Kerry's visit to the Saudis to get them on board with the plan.
I love it when people try to assert there is a difference
In the modern era now, if war gets serious somewhere, the cost effective way to squash it would be to lob a very small but very powerful item in that direction, and then stepping back and waiting for the dust to clear. It's kind of like when you get into a fight and you are in tight and both standing, a good strategy is to step hard on the other guys kneecap, and jump back and run like hell because he ain't gonna follow you very well.
I call bullshit on that one, it was nothing more than an effort to get the UAE to buy only Heinz ketchup for all those pork burgers.
If John Kerry cameto you with a plan, how long would it take before you kicked his boney ass out the door?
Oil prices go up and down like this every few years. The world hasn't ended yet, and it won't this time. A few gullible investors will get burned as they always do.
Most of us benefit from lower energy prices. It is a net positive. Of course, if you live in Houston or oil sands land you may be laid off. Not fun for them of course.
Fuck the oil producing countries and their govs. If they go broke, tough shit. That happens all the time too, which is why their people still understand gold. And no, they won't go to war because if they are broke how can they pay for that -- duh!
inclined to agree. and, the US elitists are takin'a perilous gamble. vlad and his white russian coterie will never go down w/o takin' the rest of the planet w/them.
no matter what, we can't go back to 90/bbl in a flash. bear is out of his cave and pissed off it's january.
Dude cnbc is still crying about no santa rally lmao!! It's over dumbasses!
"Inconceivable" by any other name.....
https://www.youtube.com/watch?v=OHVjs4aobqs&spfreload=10
https://www.youtube.com/watch?v=UOYi4NzxlhE
For us, yes. For the politically connected? Never.
I wonder, could the writer of this lament be any more of an idiot? Plenty of countries.companies make plenty of money from oil, so long as it stays above 9.00USD a barrel. The amazing thing is how many billions were made when that was the price. Its so amazing that Zeroheads can watch their asses get eaten in one asset class (PM's) over a five year span, and then go on to gloat over the phantom apocalypse when another asset performs the same way.
You lot are out to lunch - maybe you really ought to buy bitcoin.
Y U No buy mo mo stocks?
Gold and Silver are also below the cost of mining. If it works for Gold and Silver why not for oil as well? /SARC
"If this keeps going, someday soon somebody’s going to go to war."
"You got a war face?"
"Sir?"
"Ahhhhhh!!! That's a war face."
"Ahhh.."
"You don't scare me. Work on it."
"You got a war face?"
https://www.youtube.com/watch?v=CP94udmv83s
Barry is monitoring the stock market. No worries, brah.
Barry is monitoring Reggie's cock. Barry- "Is it up or down Reggie?" Reggie- "It's always up for you pumpkin"
Ten bux you'll never hear 'now looks like a good time to sell stocks'. lmao
Canada is Saudi Arabia. Right?
Has been for a long time actually.
Most folks would rather starve than be without "their precious." Northern folk in the USA were wise when they created Land Grant Universities.
Not that Illinois ever got the memo ironically...
The Universtiy of Illinois was founded as a land grant college. (1862)
ILL-INI
All I know is when gas hits 50 cent I buying a Tesla !
A car or the company?
You could tow a generator on a trailer behind it making it a hybrid vehicle.
"Holland" is not a country.
Please elaborate.
Edit: I got it:
http://en.wikipedia.org/wiki/Holland
And I guess this is you :)
some individuals, particularly from the other parts of the Netherlands, dislike the use of "Holland" as a substitute for "the Netherlands",[2] or even find it insulting.[3]
I'm here to learn :)
...so, oil is not theCONomy?
My wife is Dutch and my father in law served in NATO as part of the Dutch Army during the 50s. They both refer to the Netherlands as Holland.
Netherland means Low country. Its sounds demeaning today with oceans on the rise.
Holland means land of cheese and of Orange flag.
Holland is where the Spaniard imperial dreams died. Something to be proud of : Treaty of Utrecht. Orange came to England.
Yes, and New York was originally named New Amsterdam.
Why they changed it, I can't say. People just liked it better that way.
Why did Constantinople get the works? It's nobody's business but the Turks.
https://www.youtube.com/watch?v=xo0X77OBJUg
Wat dan wel ? :-)
This guy is sure loving the harm coming to people working to earn an honest living because like the price or not, producing oil is an honest living. Speculating and trading oil futures maybe not as much, but producing it is.
The finacialization tail has been wagging the real economy dog for some time now.
It always has a while in the sun before reversion. I'm fairly sure that in a modern economy, the financial tail wags the real economy dog most all of the time. It is the rule rather than the exception.
If jobs were reduced to only those that are truly productive in the classical sense, then I'm not sure what the economy would look like... 70%+ of the economy being services... virtually all of which are extravagant in any relation to survival. Even the "real economy" isn't very real...
Looks to me like at least 50% non-productive, so chop workforce participation down to around 30%?
http://www.bls.gov/emp/ep_table_201.htm
Of course overall demand would drop right through the bottom of the boat, so those productive jobs, not so safe either.
The "market" is banging your old lady in your bed and then wiping his santorum covered cock on your drapes.
George W Bush and Dick Cheney, Enron and Haliburton, the Seven Sisters and Bechtel-Fluor; Booz Hamilton and Boston consulting, Mckinsey and Arthur Anderson, Blackwater and Carlyle...all linked to the Oil patch.
Scions of the US matrix thanks to Oil, under the MIC gun.
And now its all up for grabs...the Sauds on their own and Qatar ready to forge into Europe.
And Europe is now scared of islam like new bogey man to replace the Juden of old.
When regression hits a civilization its awesome to behold.
Meh. Morgan, Rockefeller, Carnegie. These folks have been around a long time.
Google "telegraph."
Google Google even....
Paige, Ellison, Gates...billionaires everywhere these days.
vlad's got the GREAT EQUALIZER and he knows it' s available any time.
"...all linked to the Oil patch."
...and all walking around with huge boners over these plunging prices...'cuz they're going to pick up the pieces.
Canada's oil fueled housing will crash in 3, 2....
The most expensive and bubble-like areas in canada are not fueled by oil. They are fuel mostly by foreign influx of safe-haven cash, with the exception of alberta. Most canadian real estate is not anywhere near bubble territory, and has risen in price very modestly over the last 20 years.
Explains Vancouver for sure. Not so certain about Toronto.
Canada's financial centre perhaps on Bay Street?
your pensions are benchmarked and you don't think they're stuffed with oil investments?
Liquidity crisis, it's 2008.
Thank God for Eugenia! I'd never make it through this mess without seeing her perkish smile...
Gravity is a bitch.
You can be smart, first, or cheat.
Feels like the DJ has been tapped on the shoulder. Cue Donna Summer.
The elephants are mating. Time for the pygmies to get out of the grass.
I hope we get some motion to run those pygmys out. Hope they stay out awhile
Can you say "Apocalypse Now"?!!!...
To put the analogy into perspective.
What individual before a wrestling match would blow off his opponent's leg and arm and then turn around and do the same to himself, all the while screaming at his challenger you won't win?!!!
Yes, China and Russia saw this coming,probably were counting on it, and the US has
destroyed the petrodollar, and soon the dollar.
I love it when a plan comes together.
As soon as those oil derivatives start exploding,they will dump their USD.
Now I understand why they haven't already.
Quite plausible, good point.
Swing Producer? Bwhahahahaha.
Have to create an entire "ecosystem" is what "they" say now...
a little dramatic, don't you think? This would have been interesting if the aurhor mentioned a least a sentence or two on why crashing oil will cause...ECONOMIC ARMEGEDON! not sure he proved why the benefit to oil consumers is massively offset by the pain to oil producers. TD on vaca this week and needed a filler?
From malinvestment to underinvestment to malinvestment to underinvestment.
from overproduction to shortages to overproduction to shortages.
it’s the balancing of demand and supplyand the balance is rarely balanced as greed always tips the scale.
But oil is now down and that will lead to new highs which will lead to new lows which will lead to new highs.
In a forest, there is a need of a fire to destroy the large threes so the small once can became large. And if there wouldn’t be fires, the forest would die. And the same is for the market and the beautifull thing about it is thatthere’s still a free market left.
And if you’re not a daytrader or optiontrader, you can just ride it out untill there will be a new high.
Seems to pointless, doesn't it? I mean where is the progression and where is the real evolution of mankind? It's always about the same things and always, always a handful of people are making lives better or worse (mostly worse) for everyone else. Why is there so much control in a small group of people? That should be the real concern and something should be done to relinquish the control from that group. This boom or bust cycle always adds to the wealth of this group and everyone else is lucky to catch a break and ride their coattails or be toast and stand to lose it all.
When is this going to stop and when are we allowed to emancipate into responsible and free human beings? I don't even think that many people could handle that because they've been bred to be rather guided and oppressed than be free. That's why it carries on and on and it doesn't matter if the elite uses religion to extort the people or a royal claim or financial manipulations.
Say, is Belgium a good place to be? I'm curious.
I’ve been allover the world and nowhere is the food as good as in Belgium and well, I love our nation and all the differences. We make fun of each other and we moch everybody and there’s no people in europe that loves to make fun of itselfs as we do :)
Every ody leave each other alone to do what he wants but often you just talk to a person on the street and can have a conversation like it’s you’re best friend and than you just move on.
Foreigners sometimes think we argue and insult eachother but that’s our humor and we don’t take that much seriously besides the love for the city’s we live in.
I’m from a city called Ghent which is the most beautifull city with the juiciest dialect of the country and we’re number one in insulting people just as casual talk :)
There’s only 260.000 people living in the city but when walk there, it’s like you know e erybody and everybody says hello! And if we don’t know each other we smile and nod to each other as we pass by.
I know a lot of American expats and I’ve never heard any of them complain about our country.
The only downside is that the Dutch, Germans, French decided they wanted to live close to us and that’s why we have such a small coastline...
And the only reason why there’s a sea between us and England is because they don’t like water.
And we’re big fans of global warming because it will increase our coastline when holland flows under the sea. :)
How can you talk of Belgium and not mention your beer???
Bruges rocks. That area of Belgium is a rare piece of the world where they still are willing to like Americans (at least the non-obnoxious ones), as our forefathers paid a dear price for that piece of earth. Great beer, good food, very hospitable and civil-- much less straight-laced than the Germans. If you go, do yourself a favor and get away from the cities for a few nights and stay in a smaller villiage or town-- overall they can be very welcoming and curious of travelers.
Seems to pointless, doesn't it? I mean where is the progression and where is the real evolution of mankind? It's always about the same things and always, always a handful of people are making lives better or worse (mostly worse) for everyone else. Why is there so much control in a small group of people? That should be the real concern and something should be done to relinquish the control from that group. This boom or bust cycle always adds to the wealth of this group and everyone else is lucky to catch a break and ride their coattails or be toast and stand to lose it all.
When is this going to stop and when are we allowed to emancipate into responsible and free human beings? I don't even think that many people could handle that because they've been bred to be rather guided and oppressed than be free. That's why it carries on and on and it doesn't matter if the elite uses religion to extort the people or a royal claim or financial manipulations.
This is the nature of man. Our natural state is apathy and laziness. If a particular group of people is motivated and coordinated enough, then they can accomplish unimaginable things. This same concept applies to the micro... whether it be a business, organization, or even the nuclear family.
You also have to accept that most of our actions are dominated by the subconscious mind... most of us are hard wired before we reach adulthood and we lack many necessary aspects to be able to re-wire ourselves (e.g. intelligence, objectivity, humility, etc.). I also suspect that there are not many materially different versions of humans due to, among other things, culling over the last few millennia. Certain aspects of humans, e.g. the desire to push back, have been domesticated over time, no different than a canine. We like to think of ourselves as incredibly accomplished, but we're just monkeys in designer jeans.
There is not a single group that always controls, but given that biology plays a huge role in the success of these types of folks, I suspect that hereditary traits make it more likely that persons of a particular lineage continue in the game. It doesn't boil down to a particular family, religion, or anything else... it's much broader than that. However, the prospective pool of control candidates is a small subset of the population. Tack on that many are taught by former masters of the game, and rooting out these folks becomes practically impossible. The only solace is that central planning doesn't work and even the best and brightest make mistakes. For all our faults, humans have proven more complicated than planners can contemplate.
As far as emancipation goes... did we even ask to be born? From conception, we're born into bondage. I think this is the wrong sort of question... or, at the very least, one that will never have a positive answer. Rather, I would ask why people choose to settle for so little. With all of our modern conveniences, people don't even want to live life, they want to be in a life simulator. The quintessential things that ground us enough to make us human are to be desperately avoided out of a lack of convenience. If you promise this to a people, then you can likely get them to do many things. If you can give people a taste, then they will put on the chains for you.
However, I caution that this sort of thing functions in cycles just the same as everything else. While these are our default states, we do manage to spring to action from time to time. Thus far, there has always been a line in the sand so to speak. My fear is that the line is becoming so well defined that we are forever pressed next to it, but never again over.
Um, you must have a short memory buddy.
Quote from the article
"The oil price drop is a much bigger event than the US subprime housing crisis, it’s bigger than everything put together that happened in 2008. And this time, central banks are lame sitting ducks. Omnipotence is a harsh mistress. She tends to backfire."
You know, in 2008 oil prices dropped, basically, from $150 to $30 - that's a far bigger decline in oil prices than we've seen recently so how could a smaller decline in oil prices 'be a bigger event' than a larger decline in oil prices!!!
Makes no sense. The oil price decline in 2008 was a key part of the GFC in fact!!!
Twice as many oil derivatives now than there were housing ones.
$22tn vs. $12tn.
Yes - the massive size of the derivatives are a fair point. But there are ways to goose up the price again.
What happens to the price of oil when Israel (finally) gets the green light to attack Iran and Iran responds by bombing Saudi oilfields?
Is that before or after Israel gets the glass treatment ?
Iran has had nukes since the breakup of the soviets.Bought on the black.
If I know it, so does MOSSAD.
You really think Iran would use nukes and get the BLOWBACK because Israel were bombind some of their infrastructure?
Personally I doubt that.
I don't believe Iran would be able to glass Israel either. Saudi probably definitely, not Israel though.
Saudi would work just as well for Iran.
All I'm saying is Israel will not attack Iran without Uncle Scam in the lead role.
I don't think the Israelis can touch the Iranian underground depots without nukes anyways.
I have a great deal of respect for Iranian engineers.
Sure it does, how long did that decline last? Not long, it was a credit crisis which brought the price down, the recovery solved that and prices went back up again. This time is different because everyone is agreeing that the price decline will last quite a few quarters, enough so that the debt taken on, and the derivative back debt, will have to crash at the most inconvienent time, taking all but a choosen few by element of surprise, you'll be one of the ones caught off guard, trust me.
agree with your sentiment BUT
recovery from basically a global economic abyss by way of adding 10s of trillions of paper currency
can hardly call that a recovery in the organic sense of the word
To the oligarchs, it was the only recovery they needed, and got.
True - that decline didn't last long - but who's to say how long this decline will last?
Surely you see the Israeli attack on Gaza last year - and the ongoing Civil War in Syria - as precursors to what Israel really wants to do - take down Iran a peg or two.
The final part of removing the threat Iran poses to the world economy (Hezbollah in Lebanon, Hamas in Gaza, Assad in Syria and oil prices - Straits of Hormuz) - is the takedown in oil prices.
Surely you can see that the current oversupply of oil by the likes of Saudi is aimied squarely at Iran - and will allow Israel to step in at some stage in the next six months and do the attack on Iran that they've been itching for a dozen years to do.
This will have wild wild consequences, but I'm guessing the calculation is, if oil is about $25 a barrel, it might shoot to $125 a barrel. Rather than, if oil is $110 a barrel, it might shoot to $300 a barrel in such a scenario.
One must hope Russia & China can see the decline in oil prices is primarily aimed at Iran (by Saudi), and collateral victims like Venezuela & Russia (and collateral 'winners' like China) are just good luck and good fortune. I sure hope they've stationed their warships in Tartus and Bander Abbas in preparation for this attack which is clearly on the horizon at a certain oil price point which of course I have no idea what it is.
Once this happens, oil will shoot back up again to compensate Saudi Arabia and the others consprining to plunge the price at the moment.
2015 will be an interesting year.
So yes, this time is different, but I'd expect an oil rebound in the second half of the year for geopolitical reasons.
Who's to say your military solution will work? Long cheap oil bitches.
I don't see it. And stop calling me Shirley.
Classic! +1
You should get things in order :
The GFC of 2008 was the result of oil price climbing 2003 2008 for a major part
The drop of 2009 the result of the recession (oil consumption decreased, even energy consumption in general)
And current drop is more the result of the 2 or 3 years above 100, and reflects the real state of the economy.
I'm well aware of the point you make which is why I say
"Makes no sense. The oil price decline in 2008 was a key part of the GFC in fact!!!
(It was more a drop in 2008 - June to December 2008 than in 2009). There were many things contributing to the GFC that we all know about, the rapid decline in oil prices was a definite harbinger of economic malaise - just as it is this time. As I say above - I'm expecting when they want they'll (TPTB) find a way to goose the price - perhaps by geopolitical means. Taking out Iranian oil capacity might become more and more attractive - or Saudi if they want to swtich sides.Soon it will be ZEROOOO....the black swan shall cometh and "FREE ENERGY" will have arrived (finalllyyyy...geeeesh). Tons of people say healthcare should be free, food should be free, etc. etc....phones...you know. Why not oil? (SARC)
A bit melodratic perhaps (A bit?) Okay, a LOT melodramatic but in essence, he's right. The first wheel of the bus has gone off the cliff folks and it's a long, long way to the bottom. Don't look down.
You think empty shopping malls are a problem - wait until you see empty steel plants, truck dealers, camp suppliers, tool producers, surveyor companies, rigs, truck and rail transports, ... and I'm sure there are thousands that I have missed. The ripple from this on top of Obummer care will tax you to near death.
Maybe the ocar tax was a futile attempt to make up for lost revenue that they knew was coming down the pike in order to keep our wonderful gov't going and don't doubt for a minute our overlords will keep voting themselves pay raises.
"Omnipotence is a harsh mistress. She tends to backfire."
This comment of Meijer's should tell you everything you need to know about him in just 1 sentence. And no charts or graphs needed
Everyone suddenly calling for $10 oil leads me to believe the bottom may be near...
Bottom won't be in until Israel gets the green light to attack Iran - and does so. That is your oil bottom in the next 6 months.
By the way - Israeli Legislative Election is March 17, 2015.
So I wouldn't expect anything before then - but maybe Netanyahu will do it as part of his election campaign? That would really be cynical to the max.
I'd suggest April - August would be primetime for WW3 to kick off when Israel tries to take out Iranian nuclear facilities.
Don't get exhausted, you need you some sleep, i'll do some drivin.
Let the phucking market decide. Shake out the speculators. Watch as the global slowdown brings us all $20 a bbl earl.
It's the success of lil scamBO's green tech bringing oil down. LOL
So, is an oil price to be set by reference to production costs or by reference to what is needed to be able to balance budgets?
I will repeat my earlier view of some days ago, that in the end, the producers will gather around a table, work out most of their differences and agree to limit oil production and to share the market between themselves.
I realise that most of the parties involved hate each other's guts but necessity often makes for strange bedfellows.
In a world-wide depression the demand may be a lot lower than the group at the table anticipate - production to force a $100 price may mean cutting to 30% or less for a while - how many economies could survive a year of minimal taxes?
Grexit may start the ball rollin for ever country to have to deal with Russia on their own. Things getting more interesting every day.
Kick ass!!
State sales tax is by the gallon. Where is the loss to the states ??
North Dakota will do just fine if the low oil prices don’t last more than a few years. Whoever wrote this nonsense doesn’t have a clue that the state has a Budget Stabilization Fund, a Strategic Investment and Improvements Fund, and a Legacy Fund (not available until 2017 when only income and limited principal can be paid out) all funded predominately with oil taxes. In effect a sovereign wealth fund that currently has over $2 billion. Wyoming has a Mineral Trust Fund with over $6 billion. Alaska has over $40 billion of reserves in the Permanent Fund. Some states are doing it right and not spending every tax dollar they take in plus all they can borrow like the federal government. Those are significant rainy day funds set aside because they know commodity price cycles have always existed and good times don’t last forever. Yes the collapse is bad for the producing states but not yet even close to a diaster to those who have planned for just such an event.
It may be more about the human cost caused by job losses not just State revenue shortfalls.
Alaska would need a 10% annual return on its $40 Billion to cover the deficit caused by lower oil prices, based on $76 average oil price.
http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article...
North Dakota:
"The state's Legacy Fund, which receives about 31 percent of oil taxes, is expected to reach $6 billion by 2017 from about $3.5 billion today. The fund, designed as a type of "rainy day" reserve, cannot be touched until 2017."
However, the budget is based on 1.4 million barrels per day by 2017, and prices of $76 and $80 for 2015 and 2016.
http://www.reuters.com/article/2014/12/03/us-north-dakota-budget-idUSKCN...
I would like to see what their budget would look like with $50 oil at 500 Kbpd instead.
Obama announcing the appointment of an oil czar shortly
One of the bank indices BKX down 7% in the last 3 days is one of the weakest charts in sight, and may be discounting the magnitude of the impending oil defaults and loan losses far better than are the sleepy, still-mesmerized broad equity indices - unless this is the GS-FED planning to gangbang Citi like they did Bear and Lehman, but other banks are showing similar extreme stock weakness:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=bkx&insttype=&freq=1&show=&time=7
The plan is to wipe out all of our pensions dummy
I don't suppose GS was on the right side of the oil market when this all started? Or any others in the circle - maybe even the Belgian UST buyer?
was reported here that GS called for lower oil
GS is short oil
Gosh, those guys are good.
If GS set up an oil decline/debt default 10-plus times bigger than the MBS collapse, they may have finally bitten off more than they can eschew.
There can be only one!
They will up-the-price on Texas Tea when Putin screams 'uncle' three times. Moreover, nothing crashed in 08 because Geithner n' Paulson
controlled the natural destruction that would have manifested on Wall Street by bailing out Bear Stearns and twenty million other banks over the last six years. Lehman was the one that they were willing to let go because they had to let it go due to toxic waste and dithering on the part of Fuld. Paulson was right to put his foot down and let Lehman fail.
Unfortunately, Paulson and Geithner were merely buying time for themselves and their colleagues to ringfence their skin-in-the-game
and make a planned and controlled exit from the United States of America when they decided to allow it to implode further. The drop in oil pricing is due to strategic planning on the part of Wall Street
Ponzi brokers that want to make China and Russia suffer for de-Americanization of the petrodollar. When Putin relents and the people of the Russian Federation can't take the crushing hyperinflation anymore that's when the American Gubberment will force regime change on their best bud, Vlad Putin.
OR WAR
2015 brings the calculus of the entire matrix of Western governance
past war strategy and onto nuclear war which is a bit different from regular old school war IMO. The real question we should be asking
ourselves is to what degree the nutbars at the helm will opt for nukes instead of WW3 old school? So far we have the official 'cold war' 2.0
and a rebuilding of the ideology that built the Berlin Wall that got demolished by these very same players in the establishment. Ontologically, this does not look promising I must say.
"When Putin relents ...that's when the American Gubberment will force regime change on their best bud, Vlad Putin."
That's their plan. Don't think it will work. Many of us are cheering and praying for Putin -who could be the last standing barrier between the zio-elites who want slavery for Russia and for us all. The USA is currently a zionist occupied government-any chance we have of liberating ourselves someday -may well depend on Putin holding the line and prevaiuling against this onslaught.
Some smart military dude once reasoned that the plans of war were never static when confronted by the enemy opposition. With O'Bummer's record of achievement, and his special brand of American exceptionalism, we can only surmise that defeat will certainly follow
whatever plans the American Government makes towards the Russian Federation and President Putin. I like lots of American people, but their leadership in the 1% leaves nothing to the imagination when it comes to the metric of intelligent decision making on the World stage of global governance. Putin wins hands down every time IMO.
The face that goes boom.
Is now the right time to get my MBA?
Premium quality sarc! Good enough for Yorkshire!
Bullish !
With the DOD being the largest single user of petroleum in the world http://www.resilience.org/stories/2006-02-26/us-military-oil-consumption, we can now do war on the cheap, yaaaayy. This global hegemon thing is a ball. A little dated, but they do use some fuel, more than Greece.
Just when I thought we couldn't afford to invade yet another country, we get this giant windfall from Saudi. Those are our "special friends", or as dear ole dad used to say, you fly and I'll buy.
Also will be cheaper for those people from Venezuela to drive to el paso to get some soap.
My personal thoughts are that this glut is part of a Saudi Payback for USA confiscation of Saudi gold held in London and Zurich
http://www.silverdoctors.com/jim-willie-bombshell-saudi-royal-gold-ransa...
In any event the Russians are much better prepared for this financial embargo and in fact are continuing to divest/detatch themselves from the global USA zombie debt slave empire and the toxic FRN.
http://www.stockhouse.com/opinion/independent-reports/2015/01/06/gwen-pr...
Just when I thought we couldn't afford to invade yet another country, we get this giant windfall from Saudi.
Cheap oil is the gift horse whose mouth oughta be searched for Trojans.
And since when did a country go to war to burn off surplus funds? When FDR's New Deal didn't do squat his "brain trust" of interventionist totalitarian liberals came up with the idea of perpetual war for perpetual peace and they've been in power ever since.
Hey what happened to those invest in oil well ads that used to be on here with the guy with the cowboy hat. All hat no cattle?
Campbell's Farewell To Red Gap
https://www.youtube.com/watch?v=AoNYxnmyUK4
.
john dana ford r.i.p, farewell red gap.
sorry but there is ZERO analysis in this article... its just a series of observations and assertions....
unfortunately, today, analysis is useless as tits on a bull.
These oil prices are smashing the UK's only real wealth creation source. North Sea oil. Many don't know that North Sea oil, is expensive oil. Right now. 70% of British North Sea Oil firms are losing money on operations. Of private Oil companies, many recently in to try and capture money on those high prices of yesterday, of those private, 90% are losing money on operations. A solid 30% of all North Sea Oil firms face bankruptcy as current income from oil does't cover interest on leverage. That is a sure sign of a BK.
Canada seems slow to wake up to what this means, as they too are a High Cost producer. Tar Sands being earths highest cost oil. They claim to be able to hold out. Well, they lie. With the worst efficiency of all, they are losing their asses at these prices. All expansion, tens of billions worth, has just neeb cancelled. That investment would have brought 20-30K high paying jobs in it's wake. All the big new houses in Edmonton? The great shining towers of Oil Company Execs, and the underlings. They will be fired like flies. Blow back will take many months, but it is coming. Bonanza in the Tar Patch is about to get the "Saudi Royal Treatment".
CANADA is not slow to wake up. Half of the oil patch houses listed in the past month have come from homeowners that realize their housing market is imploding before their very eyes. Our Finance Minister Joe Oliver is quietly appopleptic along with the Neo-CONS in the Harper governance. This is how Canadians react to adverse climates like
winter. If one grins and bears it, all will be bearable until the sun shines again and warms things up. Our resource taxation will take a hit, but the Harper Gubberment sez they will have 'balanced books' for Election 2015 and the 'goodies' promised to the Corporatists. Most Canadians
have not even complained about our dollar loss of 15% in a little more than one year. Canadians only complain when they are completely left out in the cold and they have not turned our heat off yet. We wait until we get angry like the Bible says 'slow to anger', and then we say....
"I'm here to kill you Little Bill, for what you done to, Ned."
_Unforgiven_ is the Canadian way in the long run.
Jack, so fucking what if oil companies go bankrupt. It just means someone else buys up the assets on the cheap and tries again. Some clueless investors will lose money, like they always have and always will.
People will be laid off, and that sucks. But most of the economy benefits from lower energy prices. That means others will get jobs. The net will be positive on jobs. Think of all the truckers, farmers, manufacturers and everybody else making better profits. Food costs should be going down.
Looks like 60% of Canadian oil production is light, but a decent chunk of that comes from off-shore in Newfoundland, and a good chunk is "synthetic/upgraded":
http://www.td.com/document/PDF/economics/special/DrillingDownOnCrudeOilP...
bottom page 2. Looks to me like only ~19% light conventional from land.
Of course, you are correct about Canada's high cost to produce oil, but in all fairness to them, they are shutting down rigs fast.
Apparently, 18.75% of Canada's oil rigs have shut down... over the past week!
The price of the "black gold" in the ground just took a swan dive from a very high cliff. Yes, Canadians are going to get pummelled, as will many of the wildcatters in the US who are highly leveraged.
When oil companies hand up and fold, I guess China will come in and buy the assets in bargain bin price.
Omnipotence?
I thought it was the moon who was the harsh mistress.
"For western countries like Norway, Britain, Holland, oil and gas producers, the loss in – tax – revenue is debilitating. For US states like North Dakota, Texas, Alaska, it’s worse."
Pure BS propaganda.
I wonder if he did any real research?
1) Firstly Holland is not a Country.
2) Norway's economy is heavily dependent on oil, and heavily socialist - true. But if there were such a thing as fiscally conservative socialists, the Norse would be it. Here's their 2015 budget announcement:
http://www.norwaypost.com/index.php/news/latest-news/30211
3) North Dakota, Texas, and Alaska are not worse. That's a flat out inaccuracy. Of the three Texas carries the highest percentage of Debt/GDP at 18%. The other two are a little more than half that. Oil would have to be down for decades for their budgets to get as bad as, say, New York's, Massachussetts', or Illinois'.
North Dakota is the second LEAST indebted state, for crying out loud!
What kind of idiots does this guy take us for?
http://www.usgovernmentrevenue.com/state_tax_gdp_population
OMG. Alaska. We all forgot that about Alaska.
Sarah Palin and her kids might not get quarterly checks cut if Oil isn't priced at a premium for the rest of the nation!
If that happens Putin will ride across the Bering Strait on a Tiger on water skis and wantonly rape Timber Wolves and Carribou in sight of the children of the brave gun totin' soccer moms of Alaska!
Not good for pension funds? Not good for governments? How about fuck them? What I gotta pay more for oil products so pension funds and governments can party?
The loss of stolen money..er...tax revenue will be debilitating? To whom? Progressive criminals infesting government mafias? The same criminal governments that need a 50 to 75 per cent reduction right now?
Oh and now tanks will be in the streets huh? Where have I heard that bullshit before....yeah, a favorite line of banker scum.
Looks to me a bunch of assclowns are invested in all kinds of ways in high oil prices and this downturn has got their panties in a wad. Bad. The spin machine has cranked up the bullshit here on ZH and I am starting to see the progressive criminal media echo the same crap.
I think the oil price drop really twists the the tiny scrotum's of the anti-hydrocarbon pinhead progressive eco-murderers and similar twisted frothing at the mouth fucks like the peak oil morons. I'm going to enjoy watching all of them choke on $20 a barrel oil.
Grimaldus
If this keeps going, someday soon somebody’s going to go to war.
i stopped reading right there. WE ARE AT WAR AND THE DROP IN OIL PRICES IS A CALCULATED ATTACK ON RUSSIA. SO SHUT THE FUCK UP WITH YOUR SHIT ASS ANALYSIS. ZH FUCK YOU FOR PUTTING THIS PAID CONTRIBUTOR ON HERE.
HE'S TOTAL SHIT.
The fed can't get any traction with quantitative oiling; it's a slippery slope they are reluctant to climb.
They plan on quietly putting 1mg of oil in every piece of fiat currency that the treasury prints. This will create a massive oil shortage, and, in addition, people will burn through money like never before-raising the gdp to collosal bonfire levels. Benny B will rise from retirement atop the flames and sing "Please allow me to reintroduce myself, Im a man of wealth and taste"
https://www.youtube.com/watch?v=vBecM3CQVD8
With the DOD being the largest single user of petroleum in the world http://www.resilience.org/stories/2006-02-26/us-military-oil-consumption, we can now do war on the cheap, yaaaayy. This global hegemon thing is a ball. A little dated, but they do use some fuel, more than Greece.
Just when I thought we couldn't afford to invade yet another country, we get this giant windfall from Saudi. Those are our "special friends", or as dear ole dad used to say, you fly and I'll buy.
The drop in price was coordinated with the Saudi's to take out the Russians. I'm counting the seconds until Oblunder announces a Trillion dollar fund to "help the U.S. oil industry survive these tough challenges". Interest free, of course.
Easy enough, just buy at $100 per barrel into the Strategic Petroleum Reserve. When oil prices go to $200, sell it to the refiners for $100 per barrel.