Posted on 12/16/2015 12:16:04 PM PST by bananaman22
The Federal Reserve is about to raise interest rates for the first time in almost ten years and it couldnât come at a worse time for the oil and gas industry.
On the one hand, the oil boom was fueled by loose money from the Fed. With near-zero interest rates, money flowed into capital-intensive shale oil and gas drilling for many years. That succeeded in creating a production boom. But the boom was too successful â the glut caused prices to crash. In this sense, the Fed helped inflate the drilling bubble, which burst in 2014.
Now the Fed is trying the difficult task of trying to withdraw its heavy hand from the global economy. But it will do so gradually and slowly. That will lead to a just a tiny increase in short-term interest rates, likely by 0.25 percentage points. Few expect long-term interest rates to rise to levels seen before the 2008 financial crisis anytime soon. As such, rates could remain low for decades.
But a rate hike will still add one more bearish element to oil markets already replete with negative forces. First, higher interest rates will raise the cost of money. That will make borrowing more expensive, particularly for high-yield firms that are seen as particularly risky right now. If that means more drillers lose their access to finance, or are unable to tap finance at reasonable rates, more companies could go bankrupt.
(Excerpt) Read more at oilprice.com ...
Yellen is the new word for Liar.
The US Dollar will go through the roof.
It has to.
Oil down
Gold down
US exporters down
It’s called deflation and there’s nothing that can stop it.
Virtually all commodities down.
Long US Dollars and horde as much CASH as you can !!
Not cash in a bank.
Hard cash.
Why exactly is that?
Raising the interest rate from a quarter to a half percent isn’t going to make that much of a dent in borrowing. It’s still dirt cheap to borrow.
Obama’s plan to destroy non OPEC oil is coming together
It is only a quarter of a point.
It doesn’t help the oil price, but it is dwarfed by the effects of soft demand (e.g. China’s contraction), oversupply (shale, Iraq, Iran) and the super-glut in storage (80 year high utilization rate).
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