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"Far Worse Than 1986": The Oil Downturn Has No Parallel In Recorded History, Morgan Stanley Says
On Tuesday the market got yet another reminder of just how painful the "current commodity price environment" has been for producers when Chesapeake eliminated its common dividend in order to conserve cash.
After noting the plunge in Chesapeake’s shares (to a 12-year low) we subsequently outlined why the US shale "revolution" is now running out of lifelines as hedges roll off and as the next round of credit line assessments looms in October.
A persistent theme here - as regular readers are no doubt aware - has been the extent to which an ultra-accommodative Fed has contributed to a deflationary supply glut by ensuring that beleaguered producers retain access to capital markets. In short, cash-strapped companies who would have otherwise gone out of business have been able to stay afloat thanks to the fact that Fed policy has herded investors into risk assets.
In a ZIRP world, there’s plenty of demand for new HY issuance and ill-fated secondaries, which means the digging, drilling, and pumping gets to continue indefinitely in what may end up being one of the most dramatic instances of malinvestment the market has ever seen.
Those who contend that the downturn simply cannot last much longer - that the supply/demand imbalance will soon even out, that the market will clear sooner rather than later, and that even if the weaker hands are shaken out, the pain for the majors will be relatively short-lived - are perhaps ignoring the underlying narrative that helps to explain why the situation looks like it does. At heart, this is a struggle between the Fed’s ZIRP and the Saudis, who appear set to outlast the easy money that’s kept US producers alive.
Against that backdrop, and amid Wednesday's crude carnage, we turn to Morgan Stanley for more on why the current downturn will be "worse than 1986."
From Morgan Stanley
Worse than 1986? Really?
We have been expecting the current downturn to be as severe as the one in 1986 – the worst for at least 45 years – but not worse than that. Still, if oil prices follow the path suggested by the forward curve, our thesis may yet prove too optimistic.
Our constructive stance on the majors is based on four factors: 1) supply – we expected production growth to moderate following large capex cuts and the sharp decline in the rig count; 2) demand – we anticipated that the fall in price would boost oil products demand; 3) cost and capex – we foresaw both falling sharply, similar to the industry's response in 1986; and 4) valuation – relative DY and P/BV indicated 35-year lows.
So far this year, we can put a tick against three of them [but] our expectation on supply has not materialised: US tight oil production growth has started to roll over, but this has been more than offset by OPEC, which has added ~1.5 mb/d since February.
On current trajectory, this downturn could become worse than 1986: An additional +1.5 mb/d is roughly one year of oil demand growth. If sustained, this could delay the rebalancing of oil markets by a year as well. The forward curve has started to price this in: as the chart shows, the forward curve currently points towards a recovery in prices that is far worse than in 1986. This means the industrial downturn could also be worse. In that case, there would be little in analysable history that could be a guide to this cycle.
[There are] strong similarities between the current oil price downturn and the one that occurred in 1985/86. The trajectory of oil prices is similar on both occasions. There were also common reasons for the collapse.
A high and stable oil price in the preceding four years stimulated technological innovation and led to a high level of investment. This resulted in strong production growth outside OPEC, exceeding the rate of global demand growth. When it became clear that OPEC would no longer rein in production to balance the market (as it did during both the Nov 1985 and Nov 2014 OPEC meetings) the price collapsed.
And although MS notes that similar to 1986, costs and capex are likely to come in sharply while demand growth should materialize, the supply side of the equation is not cooperating thanks to increased output from OPEC.
Due to the sharp slowdown in drilling activity and the high decline rate of tight oil wells, we expected production in the US to flatline and start declining in 2H. This seems to be happening: according to the US Department of Energy, tight oil production in June was 94 kb/d below the April level, and it forecasts further falls of 90 kb/d in both July and August.
Now that capex is falling, we anticipated non-US production to be flat at best. Still, this has not yet been the case. At the time of our 'Looking Beyond the Nadir' report in February, OPEC production stood at ~30.2 mb/d. This increased substantially to 31.3 mb/d in May and 31.7 mb/d in June, i.e. OPEC has added 1.5 mb/d to global supply in the last four months alone.
Our commodity analyst Adam Longson argues that the oil market is currently ~800,000 b/d oversupplied. This suggests that the current oversupply in the oil market is fully due to OPEC's production increase since February alone.
We anticipated that OPEC would not cut, but we didn't foresee such a sharp increase. In our view, this is the main reason why the rebalancing of oil markets had not yet gained momentum.
If oil prices follow the path suggested by the forward curve, and essentially remain rangebound around levels seen in the last 2-3 months, this downturn would be more severe than that in 1986. As there was no sharp downturn in the ~15 years before that, the current downturn could be the worst of the last 45+ years.
If this were to be the case, there would be nothing in our experience that would be a guide to the next phases of this cycle, especially over the relatively near term. In fact, there may be nothing in analysable history.
Needless to say, this does not bode well for everyone who has unwittingly thrown good money after bad on the assumption that the Saudis will cut production and trigger a rebound in crude.
In addition to the immense pressure from persistently low prices, US producers also face a Fed rate hike cycle and thus the beginning of the end for easy money.
Of course, the more expensive it is to fund money-losing producers, the less willing investors will be to perpetuate this delay-and-pray scheme, which brings us right back to what we've been saying for months: the expiration date for heavily indebted US drillers is fast approaching, and if Morgan Stanley thinks the oil downturn has no parallel in "analysable history," wait until they see the carnage that will unfold in HY credit when a few high profile defaults in the oil patch send the retail crowd running for the junk bond ETF exits.
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You impact more people than you think, although you are somewhat verbose at times.
That is not intended to be a snark criticism...It is just a fact.
But if they haven't the patience to read then they either need learn speed reading, or, they are not worth the time.
Renewable energy is only as renewable as the equipment used to harvest it, which is to say that it isn't actually renewable. That nice "green" solar panel is the result of burning a lot of oil wherever the materials were mined, then burninig a shitload of coal to power some factory in China.
OIL has tanked
COAL has tanked
COPPER has tanked
The Baltic Dry Index is at generational lows.
But no worries - the Dow continues to have record values !!!!!
HAS IT OCCURRED to anyone ... how stupid and corrupt our Financial System looks, when this kind of stuff goes on? I know Banana Republics that that have better "price discovery" mechanisms than this. And they only deal in bullets and bananas!
Take a look at dairy commodities, or Fonterra's Global Dairy Trade auctions of late.
Not a lot of happy dairy farmers in NZ.
QE4, should it occur ,will see the $NZ/$US rate jump, and then the fun will really start.
Yes, 99% of us on ZH have known this for years. Some are cynical and buy stocks because they believe the FED will QE forever, others forsee the day when the whole thing crashes in the biggest economic collapse in history.
But, your statement is news to practically nobody.
And if they dealt in more items along with bullets and bananas do you not believe that it would tend to increase complexity of price discovery?
How many bananas does it take for a box of cartridges? How many Boxes of Cartridges does it take to buy a Bunch?
How many pesos are bullets worth? How many pesos are bananas worth?
Thhree unknowns and four questions can pretty well define a price relation. Now that is damned simple. Of course we can layer it with Futures Market Prices for bananas...Future Market Prices for Bunches, and Future Market Prices for Pesos. Now it becomes more cmplex.
Then we can add in a Stock Market that has Banana Producers and Bullet wholesalers. Now the evaluation has even become more complex.
Now lets add in thousands of more items, thousands of more stocks, etc, etc, and you can damn well see that the complexity rises considerably.
And the Fraudsters, seeing that overabundance of information, the information OVERLOAD because of the complexity, can hide themselves and obfuscate the truth, leading to greater skims.
They do not want an easy method on discovering a valid price as it will destry their chance to steal from you.
Of course we can demand HONESTY, INTEGRITY and RESPONSIBILITY. Thse caught frauding, the white collar criminals, would not only have to pay restitution, but spend considerable time behind bars for their misdeeds. They can actually be held accountable when caught.
But since they have bought the courts, law enforcement, and regulatory agencies then I would not be holding my breath for something like that to happen in the near future.
That is what the Guillotines will be used for after the Financial World collapseses in an inferno of Hyperinflation. (And they think that we are joking?)
But until the Grand Finale...It is not going to happen, I am so sorry.
"In fact, there may be nothing in analysable history."
Hah, another wonderfully amusing understatement!
Just a way of saying that this time it is different.
You betcha . .
This time the overproduction is hyper-super-charged by LIRP/ZIRP/NIRP financing and fake growth models, which have cause hyper-expansion of oil production.
Never had this much low interest rate fiat for this long for so much oil production expansion.
The many fake empty zombie chinese cities are an example of the unncessary expansion and resulting fake estimates for oil demand (which are now really spriralling down).
MS is saying it is different.
Time to bring Freedom to Iran. Oil is too cheap.
What ever happened to peak oil?
Not peak oil, peak cheap oil.
Why is this so hard for people to understand?
Oil is now harder to get, therefore it costs more to produce. No shortage, just a shortage of $30 a barrel oil.
Is this too much for you to grasp?
peak cheap oil is hard to grasp in the context of falling oil prices, yes.
maybe "peak propaganda" (I stole this from Ghordius) is more apt.
If you assume that prices are set by fundamentals, sure, but if you're a ZH reader you should know that all prices are rigged. Nonetheless, there are fundamentals at play, we have too much oil. That's indisputable.
The China boom got all resource producers creaming their jeans thinking it would never end, so they all ramped up production at any cost. That was a mistake, and now we have a massive supply overhang in every commodity.
And it ain't going away anytime soon, no matter what the delusional bulls say.
Excellent exchange Viator, piratepiet2 and Carpenter 1. Concise and insightful.
$50 is the new $30 .. we're scraping the bottom of the barrel here and they all know it
what's more likely.. that Fed raises rates so that billions of parked dead capital can earn money for nothing or that they will reset the system and eradicate a whole lot of cash values?
When the walls come tumbling down, oh when the walls come tumbling crumbling, when the walls come tumbling down oh...
Say Sir, which way to Wall Street please.
Is that a WMD in your pocket, or are you just glad to see me ?
Peak oil bitchez. We all knew this day was coming, as world supply fails to keep up with demand, and ever more expensive sources results in... no wait, that doesn't seem right...
lol exactly...
Lets play monopoly! The game thus far: A bunch of bad boys(friends of the bank) got into trouble by gambling , Check!
Ok, the bank has saved its favorite players by giving them loads of $, taking on their debts, and letting them cheat...but those bad boys just increased the size of their bets, and spread some of their free $ back to their friends the bank, ploiticians, regulators etc etc. Check!
The bank has just figured it out that it is painted into a corner. Check!
Meanwhile, the real economy (not part of the Monopoly game) is screwed too many ways to ever describe in detail. Check!
The gamblers are in trouble again. Check!
....you fill in the rest......
.....government comes along and flips Monopoly Board - says it will now be the banker - and everybody's money is now their's - meanwhile the bankers said "fuck this" they don't wanna play anymore and left, leaving you to deal with cleaning shit up - but turns out you don't wanna fucking play anymore either because you don't have any fucking money, and so you go to the fucking bar leaving board and game all over the fucking floor for somebody else to clean-up which you know will never happen because - that job sucks. you come back from bar, only to find the government has locked you out of your house, and taken your TV and shit, because while you were getting pissed, there was a rule change where now everybody owns everything but that no one owns fuck all which is about when you realize - fuck - should never have played this stupid game in the first place.
or the oligarchs take it all as in the fall of the Soviet Union.
'screwed' 9 ways to Sunday.
It's all falling apart.
Halliburton secures $500 million to fund drilling in old wells
20 July 2015, by Amrutha Gayathri (Reuters)
http://www.reuters.com/article/2015/07/20/us-halliburton-results-idUSKCN0PU11H20150720
Halliburton said it had tapped BlackRock for $500 million to help fund drilling in existing shale wells, the first such move by a major oilfield services provider at a time when oil producers are shying away from drilling new wells.
bullish. They have to keep up appearances to keep the entire show on the road. It's going to take years to wipe out all this fiat financed capex and stop the madness.
In the late '90s there was a lot of talk at very high levels about the discovery that oil is abiotic and the supply is just about limitless. New oil massive oil fields were being discovered and ones that should have run dry kept on producing. Oil looked to go below $10 a barrel. Cheap energy and low cost raw materials are the lifeblood of small business and the true economy.
This, like Tesla's discovery of free limitless electricity generated from the Earth itself didn't work for the powers that be. It sounds like a wacky conspiracy theory but there is plenty of evidence that true world changing innovation has been stifled.
The Saudis could still rake in billions with oil selling for $10. US oil companies were making billions with oil selling for less than $20 and still exploring and expanding deep sea rigs. I remember talking with some of my college friends who went on to work at Exxon that a price of $50 for a barrel of oil was seen as impossible. When prices first started creeping up I was told that at $50 it would be profitable to drill anywhere on Earth, even the bottom of the deep sea. If $20 oil still allowed for massive exploration, why is $50 oil seen as the end of the world now? Either oil really is that expensive, or we have been lied to by investment banks and traders who can't make a profit if a commodity falls below the price they paid for it.
The world functioned quite well with commodities at a fraction of their current prices. It is pretty clear that the global economy can't function the way things are right now. We have had fifteen years of absolute economic hell since the Commodity Futures Modernization Act was passed. I don't think anyone even knows what commodities should be selling for since we haven't had anything close to real price discovery for coming up on two decades. Just look at the inflation caused by the massive increase in contract volume. Did growing corn, cutting trees, mining ore, or drilling for oil really get that expensive? Or did everything skyrocket in price because contracts became the next great speculative investment.
The global depression started when total economic control was handed over to investment bankers. The passage of that piece of legislation along with the repeal of Glass Steagall has caused more damage than every war in history combined.
two words for you : petro and dollar.
Inflation. Eventually, $50 oil will be viable when the prices of labor, equipment, services, housing, food, etc., all come down. And the longer the commodity rout continues, the more likely these adjustments will occur. Talking to a kid the other day - figured his time is worth $30/hr. Hasn't worked a fucking day in his life - but - thats just what he figures he's worth........ When the reset occurs I think most (conscious) people will do just fine. Others, like this kid will have an incredibly rude awakening. The way commodities are headed and their duration, nominal wages need to come down at least 40%. Which means the nominal prices of all other things have to come down commensurately as well. And they will.
It just takes time for the shock effect to etch permanently in the minds of people, that things are never going to be the same. We are still in the denial stage. That will change and give way to a more realistic expectation once the greatest monetary experiment completes its cycle.
How do you get a 40% drop?
Just remember, historic average GOR is 12. Just keep cheering for $500 gold because that is what you guys are doing. The 80s and 90s were terrible for gold investors, the gold bubble popped three years ago and looks like maybe $300 could be in view. My bottom line is $1000. I am booking all gold profits at that point and will be out of gold forever should it get that low. I bought much of my gold below $300 and all of it below $400. I feel sorry for the chumps that bougth at $1500 and have kept "backing up the truck" ever since.
None of the historic ratios mean anything.
We are truly in uncharted waters, without a paddle.
It is different this time, but not in the way CNBC says.
I don't buy gold for dollar profits. It's insurance, not an investment.
Gold isn't really insurance. You have to sell it to get dollars to pay debts. Eventually that will happen if in fact we are in a full fledged deflationary collapse. Dollars will be worth more than gold in that situation.
WRS1..and if theres no more dollars...its insurance.
RIPS
How long do you have to visit this site before you get it? Hoarding gold is for the day after the dollar! Do NOT sell your gold for the FEDs DOLLAR!
If you are seeking to make a play on current volatility, have at it. It can go both ways, I don't think anybody really knows the short term plays in the retail sector.
My thoughts exactly. The person of average IQ will never understand this.
I bought my gold after it corrected down to 1600. I also have lots of silver that I bought when I was a boy decades ago. I will not sell until federal reserve notes are replaced by something else, or I am about to die and no longer need the insurance.
If you want to speculate, by all means use the paper market for that.
US benefits more than Europe
Europe benefits more than US
Darn these worthless fiat dollars. They buy more oil than they have in a long time, and more gold too. Hyperinflation coupled with Peak Oil is hell, ain't it? Not to mention the tens of thousands dying every week in the Ebola pandemic and from Fukishima radiation...
Time will tell. Haven't you noticed, "On a long enough timeline...?"
....so, I'm in no hurry, are you?
If this were to be the case, there would be nothing in our experience that would be a guide to the next phases of this cycle, especially over the relatively near term. In fact, there may be nothing in analysable history.
Tulips.
Yep. Commodities down and assets up is not good for the outlook for assets.
"It's the deflation, stupid."
Commodities are the only assets besides land and one's health. Anything and anyone of real worth is getting his assets handed to him.
I agree, which is exactly why a fall in commodity prices indicates a bubble in other assets.
In that case, land is the only asset that comes with a biannual tax bill.
Equities are NOT assets!
The real story is why gasoline remains around 3.00 a gallon and diesel (which is one of the first cracks off the refining tower) is even more expensive.
Hell K1 kerosene is still more expensive at the pump than JP-4 (which is more expensive to produce)
The real fraud is at the pump and no one is addressing it.
Want to put a spark into the economy, END THE FRAUD AT THE PUMP!
Milk is more expensive than a gallon of gas. You have to wonder why. /hahaha
Two points
Global Office - China - Morgan Stanley -1993
The China Files Chinese Economy through 2020 - Morgan Stanley - 2010
Oh bitchez's, we morgun stanlwee.
So long Canada, we hardly knew ye.
Incorrect, sheep fur hasn't been able to connect North America Union anticipation with broke ass European Union.
That shits still going on you know. I don't live far from the superhub, where large tracts of land have been bought and being developed. I asked people if they wanted pics, but no they'd rather take pics of BS fema sites, etc. Fk it. Let it rain hell see if I fucking care.
"pain for the majors"..................those fuckers should have enough money to GIVE THE SHIT AWAY FOR FREE for the next 1000 fucking years.
OK, I know im going to regret saying this but... could the Obama policy for Iran be right?
Ignore the nukes and the fact that they hate our guts..
Strategically are we better off if the Saudis have an enemy that is well funded, strong and close by? It will force them to build capacity, spend political capitol and treasure to face off against an Iran that has a VERY young population and has been living like the red headed stepchild of the middle east? Hell their lives are already shit what can the Saudis do to them.
Will it focus their anger more on each other and less on the Tribe (in the short term)? Is a locked and loaded ME with a weak Amerika a strategy to turn them on each other and weaken the region over the long term?
Has Obama been playing chess while the rest of us were playing checkers?
Are dogs and cats living together? Is there mass histeria (or just localized to me)?
Fuck I can feel the downvotes like a chill running down my spine....
Who knows.Possible. Neo-cons are capable of anything, including killing off their own, if they think they can come out ahead.
Notice I said neo-cons, not Obama. People think 'oh Obama did it'. As if that stupid fucking idiot was the mind behind all that. People just don't come into office and start deciding where to place nukes at, who to go to war with, etc. He just gives the order.
I dont know, Obama talks the pro Israel talk but walks the other way...
But you're right about one thing, I'm preparing myself for a Republican primary field that feels it cant stick its nose far enough up the tribes ass.
"I dont know, Obama talks the pro Israel talk but walks the other way... "
Let me know when he cuts the money or weapons flow.... Actions speak louder than words.
Lighten up Francis.
OAS to zero
The same can be said for gold. $500. Buy it all up then.
The 1998 ave. price of oil was just under$12/bbl. Adjusted for inflation, it was about $20. There are parallels in history. There are also much worse times. Oil men out in West Texas can still make money at $40.
Correct.
If it doesn't say "in inflation adjusted dollars" it's bullshit.
<$10/barrel, <10 years
Expect more of this crap.
When you Financialize every frigging thing, you get volatility up the yinyang!!!
Live by the MBA, die by the MBA....
Compare the response of the FED to the 2007 Bankster crisis and the Oil Crisis (especially shale) now.
This country really needs a come to Jesus moment, and it isn't a stupid "Black lives matter" or "save unborn lives" or "Gays marrying is the most important thing in the world".
We are sliding into some Sci Fi crazy world reminiscent of some Star Trek show, only this one won't get solved in an hour.
They (the frackers) were going to change the course of history,by making Amerika the new Saudi Arabia,but in the end,the only thing they changed was turning your tap water into bic butane fluid,and North Dakota into the worlds largest trailer park..
If the zionist cabal is on 7 year cycles... why fight it? When in Rome...
gasoline and heating oil plenty of crack spread. Deflationary recession watch the gold slam down for Executive Order 6102 repeat and wait for dollar collapse. Crazy to buy gold or silver with anything but bitcoin hopefully through a server in Iceland..
As Indiana Jones would say:
"I have a bad feeling about this."
I believe that in the long term, the only thing worth having more than food and water, may be Cu jacketed Pb.
Pb and boom sticks are a good investment.
Commodities are bottoming. If you have make money start building your position or buy an etf like DBC. crude oil traders are adding up, as well metal traders adding palladium. Big money is putting loads of money in small caps and s&p leaders or biggest caps. Theyre also buying junk bonds slowly and heavy buying short term junk bonds (SJNK). Apple is still being bought for high ride. As well as oracle. Natural gaz is being dumped. 10 yr yields will spike up in near future, days. World stock ex-USA markets are taking a hit by big speculators and money is coming to us stocks.
Also US Dollar is being dumped so prepare for a high ride on euro gbp etc. gold is still neutral in downtrend.
Earnings for tomorrow and friday will be mixed.
Good earnigs on up stocks like CAT GM UN CAM T ALTR FCX
Bad earnings and down stocks for CMCSA BMY AMZN NDAQ DGX IMAX DNDK STAG WRE SBUX R JNPR ABC CA
This sci forecast expires in one month.
Take charge. Cheers
Oil prices go down, and gas prices go up!
Just fucking nice!
Another disconnect.
Save the fucking excuses.
SH
Have any of you seen a drop in gas prices?
Yeah I know all about the taxes,
SH
My screens say it's lights out for the broad stock indices, down 3% to a 7/27 blue Monday, or nearby, temporary bottom, but with plenty more 6-12-24 month lows to go around. Commodities have been talking the collapse eloquently for weeks, but will Mr. Market finally regain his voice and take the podium, or can the Keynesian Can Kickers push this equity/bond charade a few more miles down the road to ruin?
I have to pay $2,498 by Friday July the 31st, at the absolute latest. Or else.
I have one, and only one, means of raising this sum: selling part of my (once-considerable) metals stack.
So, all I give a shit about right now is what's going to happen with metal prices between now and the 31st. How many ounces will I have to sell to raise $2,498?
I do not care at all about what's going to happen in 3 to 5 to 7 or more years.
I do not know you or your situation, so I don't mean this in a disparaging way...
...but one should really look at physical PM purchases as a long-term investment with no intention of touching until the time is right and we have a dollar collapse. It could be 6 months or 10 years. I happen to believe it will be much closer to the former, but am prepared to wait for the latter.
I would say about 2.5 Troy Ounces of Gold, or in that area. Don't panic, but sell tomorrow.
"At heart, this is a struggle between the Fed’s ZIRP and the Saudis"
Obvious solution: Do the world a favour and reduce terrorism at the same time. Bomb Saudi Arabia.
Unemployment is high in Europe and America. Real wages have declined over the last 30 years. People are in debt up to their necks (and beyond). The middle class is being chopped to pieces in America and Europe.
We live in a debt-based consumer economy fueled almost solely on consumption and easy credit. Constrain the ability to consume and you have demand destruction. When you have demand destruction, commodity and precious metal prices fall, oil inventories rise, factory orders fall - the rich investor gets nervous and pulls back - credit tightens.
Reduced investment, reduced availability of credit and reduced consumption means reduced money velocity which leads to ...well....it's called a depression. Simple really. You honestly don't need a lot of Wall Street knowledge to understand what the basics are pointing to.
1986 is SEARED into my mind, my first crash.
I was in university then, the first year in the history of the University of Alberta that engineering students could not get summer jobs.
There was ~2.2 million people in Alberta at that time and in a span of about 8 weeks, 250,000 were laid off. On each side of highway 16 east of Edmonton were lines boats, snowmobiles, bull dozers, scrapers, skidders, oil derricks, tucks of every kind....for sale. That was when I learned that, "yes Mildrid, realestate can and DOES fall in price".
Looks like we're here again.
:)
Squid
Don't worry, the ecos have been screaming about Peak Oil for years so we should be running out shortly. Then the price will be 10 gazillion dollars a barrel! This is just a temporary situation. When you consider Global Warming the price should go to 100 gazillion dollars!
No problem. An ounce of gold will still buy a few dozen barrels.
Until gas prices go down back to 1986 prices, I won't be impressed.
Oil prices are up. The sky is falling! Oil prices are down. The sky is falling!
These Diaster Porn writers have one mode.
Minor gas price decrease in my local area, 5 to 10 cents a gallon decrease. The sky is falling!
Hey, all you eco-psychos, anti-smoking, anti-plastic bags, anti-normal flow toilets, global-warming, nuts: It must be PEAK-OIL, right?
Spoken like someone who really doesn't understand peak oil. Peak oil isn't about a lack of barrels in the ground.
Must be about gold or global warming or low-flow toilets, right?
Please...tell us more about what it's not about.
I really don't think the Saudi's are doing this for "market share". That never made sense to me - if ISIS can sell their oil, then the Saudi's certainly can - to anybody at any time. I believe that the Saudi's are overproducing at OUR request, in order to put economic pressure on Russia. So basically, our government (read "Obama") is wiping out our energy sector and all the jobs in order to pressure Russia on an issue that is none of our concern. Smart. I could certainly be wrong.
I love how low oil prices are a bad thing. It's a bad thing for producers and speculators and thieves. Fuck'm, I am tired of being constantly ripped off.
Good, maybe this will shut up that damn hippie that yells at me for driving my 'Murican gas guzzling car. Dollar gas hippie, smoke that.
While I agree with Morgan Stanley's assessment that oil prices are going lower, I think it has very little to do with the so-called fundamentals and everything to do with the Japanese yen. The yen carry trade, which has provided most of the impetus for higher stock prices over the past 4 years, will unwind unless the yen keeps losing value. And, the only way Japan can keep devaluing the yen (without revealing the degree of the deflation hoax) is if oil prices are crashed even further.
The logic sounds circuitous, but it explains a lot -- including abnormally low interest rates, the US Dollar's strength, the euro's weakness and the stocks' unending rally. I consider it the grand unifying theory of central bank BS.
http://pebblewriter.com/what-oils-slippery-slope-really-means/