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Is The Political Climate Shifting Against The Oil And Gas Industry?
Submitted by Nick Cunningham via OilPrice.com,
Oil and gas companies have had a tough time over the past year trying to weather the storm of falling oil prices. But the political and financial winds are moving in the wrong direction for the industry, raising more “above ground” problems at a time that they can ill-afford it.
Drilling oil and gas wells requires a lot of money. For companies that have seen their revenues vanish because of collapsing oil prices, access to credit is obviously critically important. But U.S. financial regulators are growing concerned about a pile of energy debt that is deteriorating in quality. A report from the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve singled out the oil and gas sector when it concluded that credit risk was rising across the United States.
For example, there is at least $34.2 billion in loans in the banking sector that have a credit rating suggesting they are “substandard,” “doubtful,” or “loss.” That figure is up from just $6.9 billion in 2014. Put another way, about 12 percent of all loans to oil and gas companies are rated “substandard” or worse.
Low oil prices are undermining the ability of some companies to pay back their debt. However, increased oversight from banking regulators could force banks to take corrective measures, which could mean reducing their exposure to high-risk energy debt. Such a development does not bode well for oil and gas drillers. Tighter credit conditions – which could also be impacted by a pending rate increase by the Federal Reserve in December – will make drilling more expensive.
In the political arena, things are not any better, with last week being a particularly rough one for the energy sector.
First, the attorney general in New York announced an investigation into ExxonMobil, for what it sees as evidence that the company lied about the dangers of climate change. The probe comes on the heels of reports from InsideClimate News that the oil major’s own scientists knew about the threat of climate change decades ago. But, according to the report, ExxonMobil buried the science and instead began funding think tanks and scientific research to sow doubt about climate change.
Critics of ExxonMobil have called for an investigation by the U.S. Justice Department, a chorus that includes three democratic presidential candidates and a growing number of members of Congress. But the NY attorney general investigation has taken the scandal to a new level. Att. General Eric T. Schneiderman subpoenaed financial records, emails and other documents from the Texas-based oil major. The investigation, as The New York Times put it, “focuses on whether statements the company made to investors about climate risks as recently as this year were consistent with the company’s own long-running scientific research.” ExxonMobil confirmed receipt of the subpoena and was still forming a response on November 4. But Kenneth Cohen, vice president for public affairs at ExxonMobil, denied the allegations. “We unequivocally reject the allegations that Exxon Mobil has suppressed climate change research,” he said.
Finally, President Obama rejected the Keystone XL pipeline on November 6, which will only come as news to readers living under a rock. The immediate reaction is to look at the effect on oil markets; analysis that has been beaten to death over the past seven years. Still, as of the fourth quarter of 2015, there’s good reason to think that the rejection hurts oil sands producers because of limited pipeline capacity. Even Keystone XL’s proponents agree. Joe Oliver, the former Canadian minister of natural resources and minister of finance under Prime Minister Stephen Harper, wrote in the Financial Post about the urgent need for new pipelines. He says that Canadian oil producers would lose $100 billion over the next 15 years if no new pipelines are built. The business atmosphere is likely to get much tougher for Canadian oil now that a new government has promised a more rigorous environmental review for pipelines.
But the political fallout from Keystone XL is probably more significant than the immediate effect on oil markets. The project was rejected because of its impact on greenhouse gas emissions, a potential precedent for climate change action. The world may look back on this point as the first in a series of moves in which fossil fuel projects must climb an ever steeper political hill in terms of gaining approval. As alternative energy porjects become cheaper and cheaper, the political establishment is finding that taking on the energy industry is not as intimidating as it once was.
Bloomberg published a pretty glaring chart that sums up how the industry has for years overestimated its long-term prospects.
Based on last week’s developments, which included the launch of an investigation into the world’s largest oil company and the rejection of the most politicized energy project to date, the “above ground” problems for the energy industry are growing much worse. That could complicate the future fortunes of oil and gas companies.
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"Margin calls gentlemen,,you know the rules of the exchange"
Trading places
this exxon witch hunt is bullshit. yeah lets go ahead and fuck over the biggest taxpayer in the usa. this govt is out of control and will have to be dealt with by force
http://www.usatoday.com/story/money/personalfinance/2013/03/17/companies...
Funny how ExxonMobil wasn't a problem until it stopped donating to Hitlery's "foundation". Stop paying tribute, consequences ensue. Imagine my shock. As to the pipeline being canceled, climate change was the excuse. In reality, Buffet's control over the rail system and his "donations" to Obama seem more plausible.
False flag coming, nobody can touch the golden eggs goose.
Paris is beautiful this time of year, but all the good hotel rooms are taken.
Ad the best whores booked.
https://thinkpatriot.wordpress.com/2015/10/24/lebowski-enlightenment-a/
Question is always what political interests must be thrown under the bus as the system consolidates because of less revenue. Neocons are next, unless they do another false flag and thereby raise a credible enemy.
I'm not so sure. Oil = big money for the elite. They won't kill the goose with the golden eggs.
Correct, big oil is like big tobacco, the elites know they can siphon money off to pay for their pet projects and that society's addiction to both will insure the coffers are full regardless of the price.
Ah but you forget how stupid the progressive stupid actually is. They will bite the hand that feeds them and they will break the law to advance their agenda. It is written in progressive stone man.
Never forget, the progressive stupid, it burns.
Grimaldus
That's what one would think but I wouldn't be so sure anymore. I saw someone breakdown the numbers (or a version of) on how many economic drivers (people not employed by the government) we have left supporting the rest of the welfare state and we may be as low as 70 million. People in the past didn't think king coal would be taken down either.... or the US for that matter.
Yes but coal was replaced with something better. What is really going to replace oil?
"As alternative energy porjects [sic] become cheaper and cheaper"
It does not matter if they are free! You still need to build a proper power station for when the wind don't blow, the sun sets and the tides turn.
There is currently NO alternative power source (widely distributed) that does NOT require fossil or nuclear back-up.
I'm pretty sure we're heading more towards the Flintstones than the Jetsons, as technology is built on the back of coal, oil and gas.
Broke-ass "consumers" can't afford the higher cost of energy (expensive to extract oil, and all of it's down-line products), and so that oil will stay in the ground. And so there will be less overall energy, as oil is a master resource. The low hanging fruit is just about gone, and now nature will run it's course. Debt that will never be paid back in like value will not be incentive enough to keep the wheels of our so-called economy turning much longer.
Articles posted like this try to get you to focus on a couple of trees instead of seeing the forest - There will be less.
Tesla's gonna fix that with their beautiful battery banks. The asshats in the power industry are stuck in the legacy model for a multitude of reasons, the primary one of which is their chickenshit "risk aversion". Wind and solar is being incorporated completely wrong. They are building utility grade remote stations that still require the transmission grid to operate. This is a GIGANTIC waste of money and resources. The future is amorphous distribution systems with every house having it's own power system with back-up coming from either a substation level power generator or borrowing from their neighbors and paying it back when they are back on line. The energy establishment is fucking us every day and they don't want their gravy train to stop.
MAKE NOTE: WITH TODAY'S TECHNOLOGY, THE TRANSMISSION SYSTEM IS EFFECTIVELY SUPERSEDED. The energy industry should be preparing for it's retirement by ~ 2050.
Like a drowning man, they will sacrifice us to keep themselves in their cushy overpaid union jobs. There is a special place in hell for the power companies.
;-D
I'm pretty sure you are understating reduced ore grades by several orders of magnitude in your analysis. Capital is what we can wrest from the earth for our own productive use - dollars are a (poor) proxy for real capital.
Dollars won't build your dream - it's now too late in the game (as your last sentence acknowledges).
people who produce nothing taking from people who produce something is the socialist way comrade
... Wall Street?
"We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature's inexhaustible sources of energy — sun, wind and tide. … I'd put my money on the sun and solar energy. What a source of power! I hope we don't have to wait until oil and coal run out before we tackle that."
--- as quoted in Uncommon Friends: Life with Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel & Charles Lindbergh (1987) by James Newton, p. 31.
Exxon is being punished for business ties with Russia who is one of the last big holders of oil left on this rock. The Keystone may interfere with an already shaky debt ridden shale scam by dumping cheap oil from Canada in the US (we will regret this later). There doesn't seem to be a whole lot of profit in scraping the last of the bong/oil left in the US, at least not currently or comparable to the US historically and being that our government is crazy EXXON should probably just try buy Venezuela or something.
First, the attorney general in New York announced an investigation into ExxonMobil, for what it sees as evidence that the company lied about the dangers of climate change.
That could only mean they said "man caused climate change exists" ... that's the lie they would have had to tell. I'm sure they didn't do that.
The probe comes on the heels of reports from InsideClimate News that the oil major’s own scientists knew about the threat of climate change decades ago.
Decades ago they were peddling this nonsense as "global warming". Decades ago we saw the emails that exposed the whole thing as a contrived hoax. Anybody besides me read those emails?
This is really getting silly. The only thing we see is this climate change nonsense propaganda "heating up" ... that's the global warming we're experiencing.
They are trying to put a face on "Less" - less value to your currency + less affordable oil = Less of everything.
Per capita energy (coal, oil, gas) available has been in decline for a while now, and the debts incurred to cover it up will not be paid back at value. Blame Exxon for causing climate change, and then have politicians say "they must produce less to save us" - looks good for the politicians because less is heading our way regardless.
"No CDS will be harmed in this upcoming mother of all margin calls."
Sincerely,
ISDA
Ah...I get it..."climate shift"...good one!
BTW:
"...there is at least $34.2 billion in loans in the banking sector that have a credit rating suggesting they are “substandard,” “doubtful,” or “loss.”
Chicken feed. The mortgage mess was a $1 TRILLION problem.
Obama hates that black devil, carbon. He says there is none in his body. And I believe him.
It's simple really, we are past some version of that mythical point of "peak oil". To some degree Obama is right, from here on out oil will play a shrinking role in our energy budget. Production will slowly decline. Prices will slowly rise. Lots of noise on both charts (especially with this absurd Saudi cut in prices) and things are mostly flat right now so volatility still blips up occassionally, but the peak has passed. It's a cultural thing, an economic thing, a technological and geological thing, so sure it spills over into politics, even if Obama's irrational opinions weren't already prominent.
Look to all forms of energy to be regulated to oblivion
Energy is life
Agenda 21 is death, and that is where it's at
Bitch, ignorant bitch, stupid bitch, ....... Most are missing the point. Ms No got it, plus 1. Imports from Canada threaten our ISIS baby brethren who are funded by ........ wait for it ....... Our stalwart allies ....... partners in crime ENCOURAGED to kill America's industry and Iran and RUSSIA as a bonus.......... those wonderful peaceniks for democracy and human rights in Saudi Arabia, Zio-ville and Langley, VA.
Allah forbid we get our heavy sour from Canada or Venezuela. Oh no way .....
And for you dipshits who decry the state hobbled energy Industry, more than ever, your money is going to our 911 co conspirators, head chopping of their own citizens, Syrian-MENA terror supporting, fucks with every gallon you purchase and drive to work on, as SA imports have generally INCREASED in 2015..... And considering the hundred thousands of jobless who lost high paying (high tax paying) JOBS and the knock on effect of industry $ervice$ to the energy industry losses, you are paying even more future taxes in today's "tip of the iceberg" without end. Now lets turn to the ziodollarbanks in this geopolitical game murica is guaranteed to lose. Old bank /stock saying" I made money, the house made money, and you lost money..... two out of three ain't bad!"
The kneebone is connected to anklebone, you anti industry idiots can cut your own feet off. Americans may differ, but if you consider the alternatives critically, it is really about the capital flows from steady jobs and putting Americans FIRST that matter.
In early 2014, five hedge funds began building six figure billion dollar funding designed specifically to swoop in and haircut which is finally the stage we are in right now since energy asset prices are collapsed to the "pennies on the dollar point they engineered". I can't wait to see gasoline at five bucks in Cali during 2018, and apartment freezer space in the northeast with 5 buck Mfc Natty gas..... and idiots without feet freezing, unable to drive to work..... Still bitching about the wrong enemy, same as it ever was in the social programming of division.
It is not American Industries or the citizens that are the enemy, raping you and me...... it is the Deep State. Long wheelchairs. Massive shorts on intelligence and critical thinking stocks.
Just change the name of that commodity to iOil and everything will be fine.
Refiner stock awesome. Doubled my money in a month with 8 refiners in my portfolio. :)
We moved from Rochester, NY, to Ft. Wayne, recently. I started out ahead of the family, and visited Potter County, PA. A friend's family is from there, and I used their hunting cabin for a day to see if I could bag a deer with my bow. Figured I'd get one, then just give it to his family. Beautiful country, this was along PA 449.
The trouble started when I drove a few more miles to U.S. 6, and started West towards Coudersport. Fucking small town asshole cops, pulling people over left and right. I was going to check into a motel there, but turned around and ended up at a dive restaurant/bar a scooch east of there, to form a game plan on how to avoid the cops.
The place had maybe 10 customers during the two hours I was there. Bartender is a finance guy who knows about all the stuff we discuss here on ZH. He and his wife moved up from Buck's Cty outside Philly 20 years ago, and built a beautiful house overlooking the valley there in Tioga Cty.
Their well water is now ruined, and their idyllic view across the valley is ruined by a nat gas contraption. Property is now not worth a plug shit, in place like Colorado it would be worth a million or more.
That asshole Pegula who owns the Sabres and Bills is the one who lobbied the PA state lej to start the ball rolling on fracking, along with other small time operators. Because of ZIRP and other BS, Exxon was able to move in and offer billions to those operators. Pegula made off with over $5B, not reportable to the SEC.
The northern tier of PA is a shit hole that time forgot. So for all the 'Murican flag waiving true believers, I have a challenge for you. Go ahead and see for yourself what fracking has done.
That restaurant/bar would be packed 15 years ago during hunting season on a Saturday night, local and visitors. I counted ten customers, including myself and a shady, young off- duty cop. If you dare tread, watch your six.
Fracking is just another bubble.
Fracking is just another bubble.
Try telling that to the billions enjoying lower fuel, transportation, plastic prices
clothing, let alone the tens of thousands of high paying jobs and ancillary created jobs while they lasted. EVERY INDUSTRY is bubbliscious due to the FED/CB policies. think of fracking as a govenor on oil prices than simply another bubble.