” lower prices do not offset the damage to the sector.”
Lower oil prices do help the “real” economy where actual jobs are created in the process of adding true economic value.
However, the “fake” economy built on leverage and debt cannot sustain the default of debt of marginal players in the oil industry which cannot be paid back because of lower oil prices.
Bad news in the “fake” economy seems to be eclipsing the good to the “real” economy, which sprouts this sort of analysis.
The collapse of leveraged assets is something that will happen - and it will affect productive sectors of the economy just as it will the “fake” sectors - that would never have been created if not for “risk free” growth thanks to the Fed.
The Fed will try to bail out the lenders to marginal oil-patch players - attempting to defer the impact of this event in the near term.
It may work for a while - though in this case, I don’t see how the oil-patch jobs created by marginal players can be sustained - pumping high-cost oil out of the ground into an environment where it looks like we’ll have sub-$50 oil for a period of time.
Then again, a war that disrupts Saudi production could make things very interesting....
I've lived in a midwest collage town for many years. I have seen and experienced the upturns and downturns of the economy. Until a few years ago the main drag was full of run down bars and food joints. Businesses came and went on a frequent basis. Somewhere around QE2 all that started to change. A good chunk of the strip has been bulldozed and multi-million dollar apartment complexes have been built. Are these projects viable? I don't think they are, but only time will tell..