Oil Sector May Not Cause Financial Apocalypse After All

Oilprice.com ^ | 07-05-2015 | banana shake

[bananaman22]

Across the oil patch, banks are starting to close off their exposure to some of the riskiest oil drillers.

A new monthly survey from the Federal Reserve finds that banks that have issued loans to oil drillers are projecting some of them to go bad. Over the course of 2015, the Fed says that oil loans could “deteriorate” and that banks “expected delinquency and charge-off rates.” At the same time, the overall exposure to such loans remained small.

Around 80 percent of the banks surveyed by the Fed indicated that their exposure to shaky oil companies accounted for less than 10 percent of their commercial lending. In that sense, a wave of defaults across the oil and gas country would appear unlikely to ripple through the financial industry. Still, over half of the banks who made loans to drillers expect their loan quality to deteriorate.

[OttawaFreeper]

I never thought that the oil prices would cause this financial conundrum that some were speaking about back some two or three months ago. Up here in Canuckistan, the talking classes were using the falling oil prices as a weapon against Harper.

I found the whole thing strange as a drop in oil prices would mean more people taking car trips or buying airfares, etc.

The real problems will start because of too many people believing in Keynesian claptrap about government debt paying itself off (already seeing this across Europe and California and Detroit, etc).