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Monday, December 21, 2015

OPEC fracks us 1 of 3


OPEC FRACKS US
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Note: I don't know about you'all but I'm having a heck of a time typing out a comment.  My broadband connection is fine for games and Netflix so I'm assuming the fault lies with Blogger.  Typing is slow and letters are dropped.  I took to using my WP and cutting and pasting into the comment box.  Sorry if this is ailing you.
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We are bombarded daily with theories writ large across the InterWeb, largely based on cranial-rectal inversion syndrome ( CRIS ).  Most of them you can just ignore as they are obviously written by someone with a journalism degree from National Enquirer Magazine University.  Some gain traction only because their authors were accredited by a sanctioned education institution which is obvious nonsense but most rational people understand the powers that be have a vested interest in its dissemination and so it does little good to argue against it (  examples, such as Keynesian economics, growth paradigm, America still being a Republic or ever being a democracy, astound and delight a few out there ).   Some seem to be a combination, a CRIS theory suddenly appearing across the whole landscape and seemingly believed by one and all.  One which makes my gums bleed every time I run across it is the silly notion that Saudi Arabia, and hence OPEC, are deliberately jacking the cost of oil downward in order to destroy the US fracking industry.

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As we just discussed, the global economies have finally slowed down enough, despite years of central bank digital cash infusion, that China is drastically slowing down in its export sector which is accounting for every swinging cheese dingus and his brother out there needing to use LESS oil and hence the price is dropping.  Unemployment met with demand destruction and had a mutant evil baby called global economic collapse.  But, as we shall discuss, people that talk about the Growth Paradigm ending are pretty much like those folks who wouldn’t say “crap” if their mouth was full of the substance.  Rather, we get fantasy and excuses and everything in the book of alibi’s thrown at the issue in a vain attempt to evade slaughtering ones sacred cow.  The Saudi Manipulation theory ignores quite a few variables.  Such as, the frackers were probably subsidized from the start.  The Saudi’s wouldn’t intentionally cut revenue as their expenses were rising.  Fracking was never enough of a challenge to conventional petroleum anyway.  This was an obvious and embarrassing attempt to cover up the dramatic end of The Thousand Year Reich Of American Energy Independence.  This theory is a nice defense of Infinite Growth.  And last, how is it that after a hundred years, suddenly cheap oil is bad for the economy?

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Taking the first point, subsidized fracking, I’m not sure why this is hard to believe after witnessing the fiasco of the ethanol program.  Not being an accountant, nor playing one on television, I haven’t delved into tax credits or the like so I’m not stating with certainty that the government did indeed artificially create this sector.  Given that the entire energy sector receives such favors as a way to buy off the masses with cheaper energy I’d actually wager a slight bit of coin on it, but at this point it is a supposition.  I’m also of the firm belief that our banking establishment had a hand in subsidizing the industry, given the role increasing energy has in  growing the economy.  In effect, made up pretend money for real energy ( but, again, a supposition ).  Without knowing all the details I still believe subsidization is a pretty darn good bet.

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Continued tomorrow.

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7 comments:

  1. I think TPTB in the USA were rather hoping all the Bakken hype was at least fractionally true, as it would put the USA (and thus them) in a great position in just a couple of years - and allow them to drain a little bit more wealth and power from our nations rung out parasite riddled corpse. And if the price of oil rebounds above $80/barrel here soon it still might, but if it doesn't get there before the election 2016, you will be able to put a fork in it(the oil boom), it will be DONE. For this generation at least.
    And that means that the USA economic crumple that is going on now will become an accelerating CRASH in short order.
    Maybe all the smart people know this, and that is why none of them want to run for president (Carson, Hillary, Sanders, and Trump??? REALLY???) of if they are they are doing as half -assed job of it as they can.
    Anyone with any smarts who tries to save this country will be doomed. Anyone who tries to lay on the accelerator will get Kudos until the crash (which is starting to show up more and more in the national consciousness) gets big enough for them to get the blame, which will likely happen shortly after the next election.
    I am just hoping I can stay employed until the mass layoffs start around here.

    ReplyDelete
    Replies
    1. The oil price crash killed fracking oil, but it would have died in a year, year and a half anyway from the waterfall production declines.

      Delete
    2. Actually with creative accounting, scratching at more marginal areas of the field and subfields, and various 'cutting methods' (like the saudis cutting their oil with sea water) it could have continued for as much as 3 more years -according to someone working in the field, just less energy profitably (the money might have been close either way but not with the price declines).

      Delete
  2. “I don't know about you'all but I'm having a heck of a time typing out a comment.”

    I thought it was just me James, but I've had 3 comments eaten just recently. I had to post one twice the other day before it went through. I've heard that wordpress is better, but I don't know if it's free as with blogger?

    ReplyDelete
  3. The energy companies involved with fracking were allowed to raise large amounts of money, mostly through the bond market, based on optimistic estimates on how much oil they could extract, and sell at generously high prices, $80+ per barrel.

    This would be a large part of their subsidy.

    Now, with oil prices plunging, they are now a bad investment. No more selling bonds to raise cash. This is the investment banks way of saying, "We're taking away the punch bowl. The party is over!"

    With oil prices at such a low level, the fracking companies can't raise cash selling oil. And they can't borrow money to pay current expenses because banks know it's an extremely risky investment.

    The companies will go bankrupt unless they have the backing of a deep pocketed corporation, willing give them a large enough infusion of cash to keep going.

    ReplyDelete
    Replies
    1. I'm aware of the financial history but had in mind more of an industry wide "profit-expectation-less" investment. A back door government guarantee or something along the lines of the ethanol deal. Knowing it was a bad investment financially but not strategically, as it were.

      Delete

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