Posted on 11/03/2014 2:09:43 PM PST by SeekAndFind
Technological advances in hydraulic fracturing have fueled what some call the Great American Shale Boom. Oil and natural gas extracted from shale basins have left the US flush with energy. It's been a boon for US energy-related jobs and equipment suppliers.
But it's not cheap to tap these so-called unconventional plays.
In other words, crashing oil prices will soon make many of these energy sources money-losing projects. Morgan Stanley estimates the average breakeven oil price for these US plays to be about $76 to $77 per barrel. Goldman Sachs puts that number at closer to $75.
If the price of oil can't cover production expenses and these companies are forced to idle their operations, then you could expect spending to drop, jobs to get cut, and delinquencies and defaults to rise.
To make matters more complicated, many of these energy companies are financing their operations by borrowing in the junk-bond market, which means borrowing rates are relatively high.
(Excerpt) Read more at businessinsider.com ...
Hmmm...sound familiar Doc?
Not too smart. Seems like they are in a classic price trap.
BTTT
“Oil” does NOT equal purely energy. If the industry suddenly stopped producing you have no idea how high prices (across the board, on everything) would actually go. “Oil” is refined into many, MANY different forms for countless uses from (yes, fuel) what goes into our tanks, fertilizers, the saran wrap in your kitchen drawer to makeup sold in department stores. There are not very many products or consumables “out there” that do not use some form of oil. (It is kind of like it was put here for our use; creepy huh?)
No increase in government taxes and greater government interference in the market.
hahaha....clever.
Low prices will increase consumption and demand. Prices seesaw back and forth as capacity and demand try to catch up to one another.
It’s called The Market. (As I’m sure you and most FReepers understand.) The weak and marginal plays and players will get weeded out and some sort of equilibrium will be established until some other influence enters into the equation, like a relaxation on exports. Exposure to international pricing signals will raise prices and encourage more production.
Good. The USA engineers are forcing Mid East pirates to play. Charge to much we ramp up the fracking.
Like the old travel ads said "Ski Me."
I wonder how much the Saudis pay them to write that dribble.
Amazing, though, isn’t it how so many have lost faith in or are entirely ignorant of the existence and functions of markets?
It is common knowledge, the US has more than adequate suppies of oil should the environmentalists be shut the hell up and told to stay out of the way. Fracking has been a good thing for the US and the natural gas supply.
Thank you for sharing, Morgan Stanley and Goldman Sachs.
Now go to hell.
The gov't has 0% interest and should help finance same. Talk about building infrastructure.....
How many days reserve do you think we need for OPEC imports?
Why after a few years of increasing our own domestic supply should the government start building more reserve?
So called conservatives wanting more government regulations, taxes and spending sounds insane.
An article I read yesterday pegged the breakeven about $10 lower than the mid-70 dollar figure from Morgan-Stanley. I think the oil companies have got longer staying power than M-S is allowing for unless they’ve borrowed at too high of a rate, as noted by one poster. This will be a factor that separates the buyers from the sellers.
RE: Thank you for sharing, Morgan Stanley and Goldman Sachs.
I have a strong feeling you don’t like either of these two companies.... :)
Is USA getting more oil from USA than Saudi Arabia now? Does anyone know?
Don’t worry. The price of oil will go back up after the election.
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