$1 Trillion In Global CapEx At "Unambiguous" Risk As A Result Of Crude Crash

Just like with the Mohammed Islam story, the religious belief by the cheerleading crew that the crashing price of oil is so "unambiguously, unquestionably, undisputably" good for the US is so taken for granted, that nobody actually checked the facts.So here is one such attempt by the FT, which writes that "almost $1 trillion of spending on future oil projects is at risk as a result of the plunge in crude to $60."

The price plunge has shaken the energy industry, throwing some of the majors’ most ambitious plans into doubt and pummelling oil company shares. Projects in challenging frontier regions like the deep waters of the Gulf of Mexico are predicated on high oil prices and may not be economic with oil at $60 a barrel — the level Brent was trading at on Monday afternoon.

 

Goldman has examined 400 oil and gasfields around the world, many of which are still awaiting a final investment decision. Its analysis, based on a $70 oil price, shows that fields representing 2.3m b/d of output by 2020 and awaiting a green light have now become uneconomic. That figure rises to 7.5m b/d of production by 2025. The analysis excludes US shale.

 

The bank shows that companies will need to cut costs by up to 30 per cent — for example by forcing suppliers to take steep price cuts — to make these projects profitable at $70 a barrel.

 

In total, the production at risk from such fields adds up to $930bn of investment.

And just in case the waking up fact-checkers are confused, in the definition of GDP is Y = C + I + G + (X ? M), I is Investment.

Which means $1 trillion less in global investment. But that's ok, because Americans who are about to receive their November 401(k) statements showing a plunge in their retirement holdings courtesy of the collapse in Energy stocks, will rush to spend all those low crude price "tax-savings"... on things aside from Obamacare that is. Surely that wil lmore than make up for the collapse on the investment side.