Black Swan Coated With Crude Oil

[Liquid Goldfish]

Which means £1950 per capita extra welfare spend than the Welsh get.

I've not seen that figure before - do you have a source?

These are the per capita figures I've seen - but they are taken from Wikipedia!

• England £8,529
• Scotland £10,152
• Wales £9,709
• Northern Ireland £10,876

[frozen_out]

Apparently the Saudis need to modernise their sea rigs as they are, so I have read, falling to bits or near enough falling to bits.

A high oil price means that all the workers, service rigs, parts & bits and supply vessels are in demand and can charge more. A lower oil price means a slump in the industry and means that the Saudis can buy the parts and hire the workers & kit much cheaper. A lower oil price apparently means that they can save tens of billions in modernising their rigs.

However, I still think that they are using the lower oil price to put pressure on Putin over Syria and Ukraine and have probably agreed this with the Americans. They have the added benefit of then being able to squeeze the US and Canadian shale gas firms.

I know a couple of senior guys in the US oil industry and they mentioned just last week that oil majors have already layed off thousands due to the 'low' oil price. That's got to have downward pressure on salaries. Funny that you never hear about this in the media. Maybe I don't read the right things, or maybe it's because they're contractors.

[The Masked Tulip]

I've not seen that figure before - do you have a source?

These are the per capita figures I've seen - but they are taken from Wikipedia!

• England £8,529
• Scotland £10,152
• Wales £9,709
• Northern Ireland £10,876

It is a figure that BBC Wales sprouts often - basically that Scotland gets about £400 a year more per person than Wales does. Now that Scotland is getting £1650 more again surely that makes it around £2 more than Wales gets?

[The Masked Tulip]

I know a couple of senior guys in the US oil industry and they mentioned just last week that oil majors have already layed off thousands due to the 'low' oil price. That's got to have downward pressure on salaries. Funny that you never hear about this in the media. Maybe I don't read the right things, or maybe it's because they're contractors.

I have been reading the US forums and lots of oil workers have been commented about pay cuts but mostly about shut-downs and lay-offs. Some of the older ones can remember the last time it happened and the US oil industry basically closed down almost overnight.

I too can remember it from watching episodes of Dallas.

[zugzwang]

If it is a ploy it's a crap one because it won't work. The stuff is there, its in the ground and it will be produced when its economic to do so, either now or in the future.

The US gets cheap energy either way, and the Saudis lose either way.

But shale oil is cheap in the same way that a house bought via HtB is cheap! Take away the direct and indirect subsidies and both are more expensive than ever.

http://davidstockmanscontracorner.com/giving-thanks-for-the-oil-collapse-it-reveals-the-phony-recovery-and-speculative-rot-beneath/

OPEC has become a theater piece, and the real world out there is getting colder. Oil producing nations can’t afford to cut their output in some vague attempt, with very uncertain outcome, to raise prices. The only way to make up for their losses is to increase production when and where they can. And some can’t even do that.

Saudi Arabia increased production in 1986 to bring down prices. All it has to do today to achieve the same thing is to not cut production. But the Saudi’s have lost a lot of cloud, along with OPEC, it’s not 1986 anymore. That is due to an extent to American shale oil, but the global financial crisis is a much more important factor.

We are only now truly even just beginning to see how hard that crisis has already hit the Chinese export miracle, and its demand for resources, a major reason behind the oil crash. The US this year imported less oil from OPEC members than it has in 30 years, while Americans drive far less miles per capita and shale has its debt-financed temporary jump. Now, all oil producers, not just shale drillers, turn into Red Queens, trying ever harder just to make up for losses.

The American shale industry, meanwhile, is a driverless truck, with brakes missing and fueled by on cheap speculative capital. The main question underlying US shale is no longer about what’s feasible to drill today, it’s about what can still be financed tomorrow. And the press are really only now waking up to the Ponzi character of the industry.

In a pretty solid piece last week, the Financial Times’ John Dizard concluded with:

Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it.

While Reuters on November 10 (h/t Yves at NC) talked about giant equity fund KKR’s shale troubles:

KKR, which led the acquisition of oil and gas producer Samson for $7.2 billion in 2011 and has already sold almost half its acreage to cope with lower energy prices, plans to sell its North Dakota Bakken oil deposit worth less than $500 million as part of an ongoing downsizing plan. Samson’s bonds are trading around 70 cents on the dollar, indicating that KKR and its partners’ equity in the company would probably be wiped out were the whole company to be sold now. Samson’s financial woes underscore how private equity’s love affair with North America’s shale revolution comes with risks. The stakes are especially high for

KKR, which saw a $45 billion bet on natural gas prices go sour

when Texas power utility Energy Future Holdings filed for bankruptcy this year.

And today, Tracy Alloway at FT mentions major banks and their energy-related losses:

Banks including Barclays and Wells Fargo are facing potentially heavy losses on an $850 million loan made to two oil and gas companies, in a sign of how the dramatic slide in the price of oil is beginning to reverberate through the wider economy. [..] if Barclays and Wells attempted to syndicate the $850m loan now, it could go for as little as 60 cents on the dollar.

That’s just one loan. At 60 cents on the dollar, a $340 million loss. Who knows how many similar, and bigger, loans are out there? Put together, these stories slowly seeping out of the juncture of energy and finance gives the good and willing listener an inkling of an idea of the losses being incurred throughout the global economy, and by the large financiers. There’s a bloodbath brewing in the shadows. Countries can see their revenues cut by a third and move on, perhaps with new leaders, but many companies can’t lose that much income and keep on going, certainly not when they’re heavily leveraged.

The Saudi’s refuse to cut output and say: let America cut. But American oil producers can’t cut even if they would want to, it would blow their debt laden enterprises out of the water, and out of existence. Besides, that energy independence thing plays a big role of course. But with prices continuing to fall, much of that industry will go belly up because credit gets withdrawn.

The amount of money lost in the ‘overinvestment cycle’ will be stupendous, and you don’t need to ask who’s going to end up paying. Pointing to past oil bubbles risks missing the point that the kind of leverage and cheap credit heaped upon shale oil and gas, as Dizard also says, is unprecedented. As Wolf Richter wrote earlier this year, the industry has bled over $100 billion in losses for three years running.

Edited November 27, 2014 by zugzwang

[The Masked Tulip]

But shale oil is cheap in the same way that a house bought via HtB is cheap! Take away the direct and indirect subsidies and both are more expensive than ever.

http://davidstockmanscontracorner.com/giving-thanks-for-the-oil-collapse-it-reveals-the-phony-recovery-and-speculative-rot-beneath/

Saudi sea-rigs are apparently aging and a high oil price makes it very expensive for them to modernise them.

The lower the oil price the more the oil industry is in a rut re oil workers, supply ships, rigs for hire, parts & spares, etc, etc, and hence they can actually save billions modernising their rig infrastructure.

[frozen_out]

I have been reading the US forums and lots of oil workers have been commented about pay cuts but mostly about shut-downs and lay-offs. Some of the older ones can remember the last time it happened and the US oil industry basically closed down almost overnight.

I too can remember it from watching episodes of Dallas.

That's exactly what he said. These guys don't mess around, they act very quickly at the first sign of trouble.

[Self Employed Youth]

Yes, but the Welsh were the enemy then. That is what she called the Welsh - the enemy. She just turned vast swathes of Wales into economic disaster zones.

Still the enemy within is a new film looking back at the strike.

http://the-enemy-within.org.uk/the-film-3/

Still the Enemy Within Synopsis

Still the Enemy Within is a unique insight into one of history’s most dramatic events: the 1984-85 British Miners’ Strike. No experts. No politicians. Thirty years on, this is the raw first-hand experience of those who lived through Britain’s longest strike. Follow the highs and lows of that life-changing year.

In 1984, a conservative government under Prime Minister Margaret Thatcher declared war on Britain’s unions, taking on the strongest in the country, the National Union of Mineworkers. Following a secret plan, the government began announcing the closure of coal mines, threatening not just an industry but whole communities and a way of life.

Against all the forces the government could throw at them, 160 000 coal miners took up the fight and became part of a battle that would change the course of history. Still the Enemy Within tells the story of a group of miners and supporters who were on the frontline of the strike for an entire year. These were people that Margaret Thatcher labelled ‘the Enemy Within’. Many of them have never spoken on camera before.

Using interviews and a wealth of rare and never before seen archive, Still the Enemy Within draws together personal experiences – whether they’re tragic, funny or terrifying – to take the audience on an emotionally powerful journey through the dramatic events of that year.

Follow Norman Strike, from devising ingenious ways of getting past police road blocks in a key battleground, Nottingham, to suddenly finding himself a minor celebrity after a mishap on national television; Paul Symonds, from the optimism and excitement of a young man fighting for his future to the tragic death of his best friend on a picket line; Joyce Sheppard, from her life as an ordinary housewife to becoming a political activist and facing violence as huge numbers of police are sent in to Yorkshire villages to break the strike.

Well worth a watch.

[The Masked Tulip]

Says it all.

[rollover]

US shale boom is same as dotcom bubble, says Russian oil executive

Vice-president of Lukoil, Russia’s second-largest oil producer, says many companies will simply 'vanish'

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11259411/US-shale-boom-is-same-as-dotcom-bubble-says-Russian-oil-executive.html

Expect a panic on Wall Street next Monday

Edited November 28, 2014 by rollover

[The Masked Tulip]

Expect a panic on Wall Street next Monday

Why not today?

[skomer]

I have been reading the US forums and lots of oil workers have been commented about pay cuts but mostly about shut-downs and lay-offs. Some of the older ones can remember the last time it happened and the US oil industry basically closed down almost overnight.

I too can remember it from watching episodes of Dallas.

Didn't the low oil price trigger the Savings and Loan crisis in the US? Mass bankruptcies and abandoned houses in Texas al round.....US government spent billions on bailing them out similar to sub prime in the Noughties....

I wonder how exposed the current US Banking industry is to the Shale and ancilliary oil industries as the Saudi's seem to be intent on cutting them down to size.....

[crashmonitor]

Why not today?

First scent of retracement today since the post Ebolageddon bounce, FTSE 100 off 3/4% and DAX getting cold feet within spitting distance of all time high. Probably nothing other than profit taking, but it will be interesting to see if we can get something meaningful going.

Edited November 28, 2014 by crashmonitor

[The Masked Tulip]

First scent of retracement today since the post Ebolageddon bounce, FTSE 100 off 3/4% and DAX getting cold feet within spitting distance of all time high. Probably nothing other than profit taking, but it will be interesting to see if we can get something meaningful going.

By Monday all the US etailers will be out with their Black Friday sales PR saying, no doubt, how great it has been for them.

[crashmonitor]

By Monday all the US etailers will be out with their Black Friday sales PR saying, no doubt, how great it has been for them.

Meanwhile the Telegraph have temporarily put the mockers on this rally by seeing a new high on the FTSE 100 by the end of December. I guess they have a point 19 of the last 20 Decembers have seen positive moves.

http://www.telegraph.co.uk/finance/personalfinance/investing/11257631/Why-the-FTSE-100-could-still-break-its-all-time-high-in-2014.html

[rollover]

U.S. stocks came off highs on Black Friday amid pressure from lower oil prices following OPEC's announcement that it would not cut its output.

The S&P 500 Energy Sector entered bear market territory with a plunge of more than 6%.

[Sour Mash]

Looks like the septics strategy of trying to crash Red Vlads economy with cheap oil has had unexpected economic consequences for the companies who form a key part of their own national energy security.

[rollover]

Speculators increase bets that Brent crude will fall to $65 in first quarter

Speculators according to options market data increased these positions before the OPEC meeting in Vienna this week, as expectations rose that it would not cut production - which turned out to be correct. http://www.investing.com/news/stock-market-news/speculators-increase-bets-that-brent-crude-will-fall-to-$65-in-first-quarter-318411

Who had the information before the meeting?

Edited November 28, 2014 by rollover

[The Masked Tulip]

If Brent Crude goes to 65 bucks where will WTI be then?

[Killer Bunny]

If it breaks $65 it'll head 45/55

[rollover]

With oil company revenues set to drop on the back of a rout in prices, boards will have to cut investments and increase borrowing to maintain their cherished dividend payouts. OPEC's decision on Thursday not to cut production in order to prop up oil prices sent markets reeling. Oil company shares slumped, wiping billions off firms' market value and leaving dividend payouts as the only solace for shareholders. The realisation that oil prices could remain in the $70-$80 a barrel range for a prolonged period, after averaging around $110 a barrel between 2011 and 2013, is putting renewed strain on already lean balance sheets. "While oil prices are below $80 the majors will be paying dividends out of debt. They can live with higher gearing but they will not cut dividends." http://m.economictimes.com/news/international/business/facing-lower-oil-prices-companies-to-borrow-to-protect-dividend/articleshow/45312624.cms

And borrowing wil rise. Win win for everyone.

[Ash4781]

Do we think this is the end of OPEC ? That's a good thing. I can't really judge the consequences. Eg. Osbourne might need to give tax breaks to N sea oil PProduction. I think I read he ruled out a fuel duty hike.

[macbeth79]

I too can remember it from watching episodes of Dallas.

LOL

[Gigantic Purple Slug]

Do we think this is the end of OPEC ? That's a good thing. I can't really judge the consequences. Eg. Osbourne might need to give tax breaks to N sea oil PProduction. I think I read he ruled out a fuel duty hike.

I suppose for OPEC to end it has to really start.

Has OPEC actually demonstrated any ability to control/limit oil production in the recent past ?

Edited November 29, 2014 by Gigantic Purple Slug

[The Masked Tulip]

Didn't the low oil price trigger the Savings and Loan crisis in the US? Mass bankruptcies and abandoned houses in Texas al round.....US government spent billions on bailing them out similar to sub prime in the Noughties....

I wonder how exposed the current US Banking industry is to the Shale and ancilliary oil industries as the Saudi's seem to be intent on cutting them down to size.....

Yep, I think so.

There were thousands and thousands of job losses in places like Texas. One minute people were living very comfortable lives - and had the mortgages, cars, lifestyle, etc - to match and, overnight, the oil industry basically closed down.

I made a joking reference earlier to it being mentioned as storylines in the TV series 'Dallas' - where the likes of JR Ewing and Cliff Barnes found the banks calling in their loans and the oil-wells all being switched off. But it was no joke. That is how serious it was - the oil price cut was so devastating that it featured in a top US TV show.

So thousands and thousands of workers lost their jobs... and loads of banks who have lent to the oil companies or the oil workers so started to go bust.

In recent days I have read several articles stating how the oil price cut could affect banks who have loaned heavily to the US shale oil companies.

It even has its own wikipedia page: http://en.wikipedia.org/wiki/1980s_oil_glut#Impact- note how it says that the US economy benefitted from the drop in the oil price.