the 2020 crash 2

THE 2020 CRASH 2

You want to believe that fracking fuel is the same thing as conventional oil.  It is emphatically NOT.  Not only is the net energy delivered from it far less, the only thing you get out of the bastard is gasoline.  All that neat stuff in petroleum like diesel to transport food to your ass, that doesn’t come with fracking oil.  No one is saying gasoline isn’t a great thing.  When you live thirty miles from town it is indeed a very good thing to have available.  All I’m saying is that it isn’t the same thing.  Apples and oranges.

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With the ongoing economic slowdown globally, less fuel is required.  Which means that few people with the means to buy oil are forced to accept Canadian tar, Venezuelan sludge or American fake fracking fuel.  Instead they can have plain old conventional oil.  Which means that fracking fuel is selling for less.  Less demand, lower price.  Lower prices for fracking fuel simply place that much more stress on the industry to keep pumping.  Now, that said, we do have our current gasoline price hikes which are skewing the above dynamic.  There might be production declines in fracking.

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The Federal Reserve doesn’t say, print up money and give it to the frackers.  It prints up money and says, hey want to borrow money at 1% interest?  Giving and loaning are two different things.  In 2009, when local governments were in trouble with being unable to tax enough, the federal government didn’t GIVE them money.  The central bank offered really favorable terms on loans.  So it was with the fracking boys.  They still have to service those loans.  Even if you never pay principle, one percent of millions and billions STILL requires extra profits from your business to pay back.

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And the fracking industry as a whole makes what kind of profit?  That’s right, zero.  It is a bit difficult to pay back any interest on zero profit.  Obviously, these guys are masters of screwing over someone somehow to pretend to make profits to pad their quarterly bonus pay which buys hookers and blow.  But you can only play a rigged game for so long.  It looks as if presently even as oil prices increase, frackers are still starting to fail spectacularly.  Just a whiff, mind you.  I’m not predicting anything as the data is lacking. 

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This could be nothing more than simply the natural halt to increased production.  To come close to profit, or to boost the stock prices, the frackers went hog wild on new drilling.  In desperation, lower production wasn’t even a consideration.  But they probably maxed out drilling even the marginal fields and it got too expensive and they have to cut back on the increases.  Which in a growth paradigm economy is the same as decline.  When you MUST grow, a return to less growth or no growth is the same as falling production.  Plateauing is the same as falling.

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The gap between fracking prices and conventional prices has also closed.  To me, this might give credence to the theory that the Midwest flooding is going to cut ethanol production.  The only fly in that theory is that I’m not sure how much gasoline MUST be ethanol.  I know 10% is the regular mix, but can folks put in less, voluntarily?  If so, if fracking fuel is in increased demand to substitute for the falling ethanol supply ( or the perceived coming falling in supply ), and prices rise even with the global slowdown, this tells me the fracking supply is contracting.

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Again, I’m Wild Ass Guessing here.  I simply don’t have enough information.  But a telling indicator was that the government agency that makes up the statistics of energy ( for instance, counts imported crude being refined then shipped back out as production.  True story ) just adjusted projected fracking production down.  That usually means they wildly overestimated positively and then start slowly taking off fractions of percentage points each time so as not to be caught in too much of a lie.  In the meantime, reality was ten percent down the whole time.  Such is our faithful public servants modus operandi.   

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Now, this could mean several things.  Fracking companies are failing, or cutting production to cut operating loses.  The fields are producing less and there is nowhere else to go to keep up production.  Banks have finally stopped loaning as much to continue.   Or a combination of those.  But even if production for whatever reason still decreases ever so slightly, it still adds up to NO growth.  In itself this could be a small thing, but added to all the other issues ( primarily caused from higher interest rates ) it could very well be the straw on the camels back.

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Now, I will say that if you wanted to get extra super paranoid, you could dive down the rabbit hole, revise your SpyCraft 101 learning, and wonder if all this reported data isn’t a theatre production to take our minds off far worse occurrences.  Say, the death of the PetroDollar having advanced far more than thought.  Derivatives failures in the fracking financial sector causing the next Lehman’s Moment.  Use your imagination-it can always be far worse.  But JUST the best case, and the economic crash is already started.  Lack of energy GROWTH is what brought us the 1970’s.

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Granted, plateauing of energy production alone didn’t give us the Disco Decade.  Vietnam ushering in the death of empire, the end of the gold standard, our subsidizing Japanese and Korean steel to grow anti-communist economies killing off our own industry, all these and more baked the cake.  Today, we have as many factors leading to the crash.  The death of the PetroDollar, the inability of anyone to borrow any more money, the ( likely ) quadrupling of the Derivatives Market in the last decade, unlimited immigration, the falling energy EROI.  And more.  When it finally all converges into the Perfect Storm, the ship goes down.  Fun times.

( .Y. )

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