Tag Archives: Shale oil producers

Trump: Live by the Oil, Die by the Oil, by Tom Luongo

Posted on April 24, 2020 | 1 comment

Trump’s Energy Dominance policy has not led to energy dominance for the US and is in part responsible for the impending destruction of the US shale oil industry. From Tom Luongo at strategic-culture.org:

From the very beginning I’ve been a staunch critic of President Trump’s “Energy Dominance” policy. And I was so for a myriad of reasons, but mostly because it was stupid.

Not just stupid, monumentally stupid. Breathtakingly stupid.

And I don’t say this as someone who hates Trump without reservation. In fact, I continue to hope he will wake up one day and stop being the Donald Trump I know and be the Donald Trump he needs to be.

I don’t have Trump Derangement Syndrome of any sort. Neither MAGApede nor Q-Tard, an Orange Man Bad cultist or NPC Soy Boy, I see Trump for what he is – a well-intentioned, if miseducated man with severe personal deficiencies which manifest themselves in occasionally brilliant but mostly disastrous behavior.

Energy Dominance was always a misguided and Quixotic endeavor. Why? Because Trump could never turn financial engineering a shale boom into a sustainable advantage over lower-cost producers like Russia and the OPEC nations.

The policy of blasting open the U.S. oil spigots to produce a production boom built on an endless supply of near-zero cost credit was always going to run into a wall of oversupply and not enough demand.

The dramatic collapse of U.S. oil prices in the futures markets which saw the May contract close on April 20th at $-40.57 per barrel is the Shale Miracle hitting the fan of low demand and leaving the producers and consumers in a state which can only happen thanks to biblical levels of government intervention.

Continue reading →

1 Comment

Posted in Business, Collapse, Debt, Energy, Government

Tagged , , , ,

The Russia-Saudi Oil-Price War Is a Fraud and a Farce, by Mike Whitney

Posted on April 19, 2020 | 2 comments

Saudi Arabia wants to punish US oil producers for reaping the benefits of the global oil cartel without bearing any of the costs. from Mike Whitney at unz.com:

The Russia-Saudi oil-price war is a fabrication concocted by the media. There’s not a word of truth to any of it. Yes, there was a dust up at an OPEC meeting in early March that led to production increases and plunging prices. That part is true. But Saudi Arabia’s oil-dumping strategy wasn’t aimed at Russia, it was aimed at US shale oil producers. But not for the reasons you’ve read about in the media.

The Saudis aren’t trying to destroy the US shale oil business. That’s another fiction. They just want US producers to play by the rules and pitch in when prices need support. That might seem like a stretch, but it’s true.

You see, US oil producers are not what-you’d-call “team players”. They don’t cooperate with foreign producers, they’re not willing to share the costs of flagging demand, and they never lift a finger to support prices. US oil producers are the next-door-neighbor that parks his beat-up Plymouth on the front lawn and then surrounds it with rusty appliances. They don’t care about anyone but themselves.

Continue reading →

2 Comments

Posted in Business, Energy, Geopolitics, Governments

Tagged , ,

Trump – Master of the Seen – Vandalizes U.S. Economy, by Tom Luongo

Posted on April 18, 2020 | Leave a comment

Trump’s emergency economic measures ignore both causes and consequences. From Tom Luongo at tomluongo.me:

Government intervention into the market is always, and without fail, the wrong response to an economic problem. Politicians justify their intervention with ‘saving jobs,’ ‘dealing with a crisis’ or simply, ‘because I can.’

They only focus on the ‘seen’ and ignore the ‘unseen’ effects of their policies, selling them to voters on that basis alone. This is the first rule of economic analysis.

The great Frederick Bastiat described this in his seminal work of 1850, ‘That Which is Seen, and That Which is Unseen”

No discussion of the secondary or tertiary effects is allowed.

Even though those effects are often far worse. But because they are harder to predict and more pernicious and diffuse they are ultimately ignored.

President Trump is no different in this than any other politician. In fact, he may be one of the worst examples of a politician doing too much in history. To Trump nothing cannot be fixed without his direct application of the weight and force of the U.S. government.

Continue reading →

Leave a comment

Posted in Banking, Business, Debt, Education, Energy, Financial markets, Government

Tagged , , , , ,

OPEC++ Or A Dead Shale Industry? by Moon of Alabama

Posted on April 9, 2020 | 2 comments

Vladimir Putin has the world oil industry by the balls, particularly the US shale producers, whose costs are far higher than Russia’s. From Moon of Alabama at moonofalabama.org:

Today there is a meeting by video of the OPEC states and Russia. Tomorrow the energy ministers of all G-20 states will likewise meet. Their discussions will be about the sinking global oil price caused by a lack of demand due to the novel coronavirus pandemic and record oil output from Saudi Arabia and Russia. ‘Western’ media have been optimistic that an agreement will be found:

The Organization of the Petroleum Exporting Countries and other producers including Russia, a group known as OPEC+, are expected to discuss record cuts equivalent to 10% to 15% of global supplies, although demand has plunged by up to 30%.

It is unlikely that OPEC will agree on any cut unless the U.S. and other large producers join the deal. The U.S. is, for now, unlikely to do that.

Until the end of the last OPEC+ agreement this month and the onset of the pandemic demand slump, the three top producers were the U.S. with 12.7 million barrels per day, Russia with 10.9 mbpd and Saudi Arabia with 9.8 mbpd.

Since 2016 OPEC and Russia had reduced their production to keep the oil price in the $60/b range. This effectively subsidized the U.S. shale industry. U.S. production kept growing while production by Russia and Saudi Arabia was artificially limited. It allowed the U.S. to grab more global market share at profitable prices.

U.S. crude oil production Continue reading →

2 Comments

Posted in Business, Debt, Economics, Economy, Energy, Governments

Tagged , , , ,

Trump, Putin Will Discuss The End Of U.S. Shale Oil, by Moon of Alabama

Posted on March 30, 2020 | 1 comment

Trump is probably not going to be able to negotiate much of a cease fire with Vladimir Putin in Putin’s war on US shale oil. From Moon of Alabama at moonofalabama.org:

Three weeks ago, when the Russian and Saudi war on U.S. shale oil started, we wrote:

In the first week of January crude oil reached $69/bl but it has since dropped to $45/bl as the coronavirus crisis destroyed the global demand. The Saudis tried to make a deal with Russia, the second largest exporter after Saudi Arabia, to together cut oil production to keep the price up. But Russia rejected a new OPEC cut. It wants to keep its production up and it will use the crisis to further undermine U.S. oil fracking production. As the whole fracking boom in the U.S. is build on fraud the move might well be successful.

Russia does not have a budget deficit and is well positioned to survive lower crude oil prices without much damage. Saudi Arabia is not.

Only a week later oil was already at $30/barrel and we predicted that it would go down to $20/bl.

On Monday the U.S. WTI oil price index reached that mark. Oil prices in other places are falling even further:

Canadian heavy crude has become so cheap that the cost of shipping it to refineries exceeds the value of the oil itself, a situation that may result in even more oil-sands producers shutting operations.Western Canadian Select crude in Alberta dropped to a record-low close of $5.06 a barrel on Friday, according to Bloomberg data going back to 2008 …

The corona virus crisis has led to drop in global demand by some 20%. The world production and consumption in normal times was at about 100 million barrel per day. Consumption is now below 80 million bl/d. But after the OPEC+ agreement failed Saudi and Russia both started to pump as much as they could to regain market shares. Together they are increasing their production by some 3-4 million barrels per day. All that oil has to go somewhere.

Continue reading →

1 Comment

Posted in Business, Debt, Economics, Economy, Energy, Governments

Tagged , , , ,

Putin Unleashes Strategic Hell on the U.S., by Tom Luongo

Posted on March 16, 2020 | 1 comment

Maybe demonizing Vladimir Putin, groundlessly blaming him for conspiracies to interfere in US politics, moving huge NATO forces to Eastern Europe’s border with Russia, abrogating long-standing arms control treaties, and trying to throw monkey wrenches into the Nord Stream 2 pipeline weren’t such good ideas after all. From Tom Luongo at tomluongo.me:

I am an avid board game player. I’m not much for the classics like chess or go, preferring the more modern ones. But, regardless, as a person who appreciates the delicate balance between strategy and tactics, I have to say I am impressed with Russian President Vladimir Putin’s sense of timing.

Because if there was ever a moment where Putin and Russia could inflict maximum pain on the United States via its Achilles’ heel, the financial markets and its unquenchable thirst for debt, it was this month just as the coronavirus was reaching its shores.

Like I said, I’m a huge game player and I especially love games where there is a delicate balance between player power that has to be maintained while it’s not one’s turn. Attacks have to be thwarted just enough to stop the person from advancing but not so much that they can’t help you defend on the next player’s turn.

All of that in the service of keeping the game alive until you find the perfect moment to punch through and achieve victory. Having watched Putin play this game for the past eight years, I firmly believe there is no one in a position of power today who has a firmer grasp of this than him.

Continue reading →

1 Comment

Posted in Business, Currencies, Debt, Economics, Energy, Financial markets, Foreign Policy, Geopolitics, Governments, History

Tagged , , ,

The Putin Stimulus: $30 Oil Will Be Great for the Global Economy, by Marko Marjanović

Posted on March 15, 2020 | 1 comment

Cheap gas will make life easier for those of us who drive. It might put a dent in electric car sales, though. From Marko Marjanović at anti-empire.com:

The world should be mailing thank-you letters to Moscow right about now

$30 dollar oil will be great for the global economy (and in turn, a good global economy is good for oil). At a time when the global economy is visibly losing steam, when we’re overdue for another business cycle recession, and when nobody seems to have an answer, Moscow delivered what nobody else could — a massive economic boost for the whole world.

Sure there will be losers, chief among them US shale and the Saudis who need far higher prices to make their budgets work.

But then as a whole, the US shale has always been a loss-making enterprise for America. The scaling-down of shale is not bearish for the US at all. It’s bullish. If Putin can make Americans stop throwing more good money down the shale pit that’s not a bad thing, that’s a giant favor to the US and the health of its economy right there.

To say nothing of the effect of cheap energy itself. Personally I don’t think even $30 oil will be enough to avert a crash but if anything could, it would be that.

Continue reading →

1 Comment

Posted in Business, Economics, Economy, Energy, Geopolitics, Governments

Tagged , , ,

How Black Swans Are Shaping Planet Panic, by Pepe Escobar

Posted on March 11, 2020 | Leave a comment

One interesting possibility raised in this article is that Russia’s decision not to support OPEC and let the price of oil fall was directed at US shale oil producers and was payback for the Trump administration’s opposition to Nord Stream 2. From Pepe Escobar at consortiumnews.com:

Is the planet under the spell of a range of Black Swans – a Wall Street meltdown caused by an alleged oil war between Russia and the House of Saud, plus the uncontrolled spread of Covid-19 – leading to an all-out “cross-asset pandemonium,” as billed by Nomura, the Japanese holding company?

Or, as German analyst Peter Spengler suggests, whatever “the averted climax in the Strait of Hormuz had not brought about so far, might now come through ‘market forces’”?

Let’s start with what really happened after five hours of relatively polite discussions last Friday in Vienna. What turned into a de facto OPEC+ meltdown was quite the game-changing, plot twist.

OPEC+ includes Russia, Kazakhstan and Azerbaijan. Essentially, after enduring years of OPEC price-fixing – the result of relentless U.S. pressure over Saudi Arabia – while patiently rebuilding its foreign exchange reserves, Moscow saw the perfect window of opportunity to strike, targeting the U.S. shale industry.

Shares of some of these U.S. producers plunged as much as 50 percent on “Black Monday.” They simply cannot survive with a barrel of oil in the $30s – and that’s where this is going. After all, these companies are drowning in debt.

A $30 barrel of oil has to be seen as a precious gift/stimulus package for a global economy in turmoil – especially from the point of view of oil importers and consumers. This is what Russia made possible.

And the stimulus may last for a while. Russia’s National Wealth Fund has made it clear it has enough reserves (over $150 billion) to cover a budget deficit from six to 10 years – even with oil at $25 a barrel. Goldman Sachs has already gamed a possible Brent crude at $20 a barrel.

Continue reading →

Leave a comment

Posted in Banking, Business, Debt, Economics, Economy, Energy, Financial markets, Foreign Policy, Geopolitics, Governments, Medicine

Tagged , , , ,