Posted on 04/27/2015 7:57:00 AM PDT by SeekAndFind
The oil crash is hammering the Texas economy.
The latest manufacturing index from the Dallas Fed came in at -16, better than last month's -17.4 reading, but below expectations for -12.
Last month's reading was the lowest reading in 2 years.
But this report's real impact is seen in the comments form the state's business leaders, which show that the oil crash is still weighing on activity in Texas. Big time.
According to a comment from an executive in the fabricated metal manufacturing sector, "Our oil and gas customers have come to a complete stop. It looks like everyone in the industry is digging in for a long-term trough."
This same executive continued, "It looks like the graph will not be a 'V' with a short flat bottom, but a graph that looks like bathtub with a large drain at one end that will take some suppliers down."
Monday's report also indicated that the company outlook index fell to its lowest point in nearly two and a half years. Additionally, the production index came in at -4.7, the second straight negative reading.
From the chemical manufacturing sector, one executive said, "2015 started slower than expected. Lower energy prices have adversely impacted our business in the energy sector; other businesses are steady but aren't showing the growth we would have expected. The environment is tepid at best."
The strong US dollar, which has weighed on corporate earnings during the first quarter, is also hitting the Texas economy. One executive from the paper manufacturing sector said the strength of the dollar, "is starting to have an effect on our orders and outlook."
(Excerpt) Read more at businessinsider.com ...
The Saudi strategy is very short sighted. Those countries that are offline or falling behind on production won’t stay that way forever. They are not likely to diversify because the reasons they’re offline or falling behind are directly linked to their culture/governance model. Eventually, things will get so bad that a new dictatorship will come online and get things going.
The Saudis won’t drive other oil producers out of business, unless they’re able to empty the reserves in other countries. The new oil prices are permanent and will fluctuate over time, but within a narrow range.
US producers won’t sit on their hands. They’ll continue to innovate so as to use and profit from a valuable resource. If they’re able to improve across upstream, midstream and downstream incrementally by say 3% annually, in 23 or so years they’ll have doubled profits/productivity or whatever metric the 3% applies to.
The only way for the Saudis (and Kuwait/UAE) to win by this strategy is to end American innovation. While possible, we’re a long way off from there.
As the American way of life spreads to the rest of the world (and it’s a good thing for everyone, except the crazies), demand for petroleum products will simply grow. The world and particularly Americans are best served by a dynamic energy market where government doesn’t pick winners or losers, but gets out of the way.
I disagree. I think they are very long term sighted; probably more than anyone else.
I see their actions as determining where the price of oil can remain without a continued loss of their market share. If the stable price of oil is $60, they will work at that price.
At $100 dollars, the world confirmed that was enough for private industry to significantly grow production outside of OPEC. Good for us, bad for them, in the long run.
When has the price of oil been stable?
It is a relative term... ;-)
I would mean “stable” from their point of view in this case, which really only matters that they don’t have to cut production and that other production doesn’t grow AND that they make enough to cover their spending....
When supply is growing faster than demand, for more than a year, that price isn’t stable...
Or demand growing faster than supply. It’s the market that will determine prices, not the Saudis. One advantage they have is massive financial reserves. They’re in a very desperate political situation and a destabilized Iran and region isn’t healthy for them.
I still think that American innovation will do more for energy and oil prices than Saudi market meddling.
I don't see OPEC failing to agree to cut production as Saudi market meddling. It is more in line with allowing supply and demand to work out the price.
I see Saudi as recognizing that $100 oil with current technology was a long term losing situation for them. And if Venezuela, Iran and a few others needed >$100 to pay for their overspending, that was their problem, not Saudis.
I think the Saudis are crazy, but in general, I don't think they are stupid with their revenue projections.
Interesting and I’ll watch for what you say. Neither of us can guess motives, but low prices are a tool for the Saudis. It’s clearly having an affect worldwide and in America’s oil patches.
Never trust an Arab.
I understan that most of OPEc called for cuts last November and only those with significant cash reserves resisted.
Venezuela, Iran have had a major cash problem and have had to turn to the likes of China to survive.
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