Tag Archives: #U.S.FederalEnergyCommisson

A Race To The Bottom?

PumpingRigWTexas

Pumping Rig In West Texas

Friday, August 21 the Dow Jones Industrial Average dropped 530.94 points, down 1012 points for the week or a 5.8% decline.   This as WTI oil closed at $40.45 down $2.55 or a 6% decline for the week.

The news media made a big deal about oil dropping temporarily below  $40.  The big picture is that oil has dropped 55% in the last year, to a six-year low.

The oil price decline has led Saudi Arabia to borrow $4 billion in July and to burn almost $62 billion in foreign reserves this year.  Analyst suggest the Saudis could issue bonds around $5 billion a month through the rest of the year to foreign investors.  Its budget deficit is expected to reach 20% of GDP in 2015.

Saudi Arabia’s aggressive fight to defend OPEC’s share of the global market has contributed to the massive oil glut.

Some suggest Riyadh refusing to cut oil output in hope to drive other producers, such as U.S. shale companies, out of business.

Professionals in the oil sector keep cutting the price of oil futures in their projections.  The financial sectors exposure to energy could be the next shoe to drop.  One big bank said 72 out of 74 energy producers requested modification of their loan covenants.

Conclusion…With OPEC, Russia, and the United States pumping record oil production, the current six-year low in pricing may be  with us for the rest of year until some production comes off line.

Sources: “What’s Really Going On With International Production,” CNBC August 20, 2015 interview with Dr. Ken Moors; “Riyadh is refusing to cut output,” CNN Money-London by Ivana Kottasova and John Defterios, August 6, 2015,

Big Oil’s Fear: A Price Shock After $114 Billion of Cuts

USrigcountUS Oil Rig Count Continues To Drop

Introduction…The oil industry is get accustomed to the new pricing of $50 to $60 per barrel of oil. However, the industry is looking forward to a bigger challenge.

Price to rise further…Oil companies are warning there will be a much higher price to pay in the future for all the new drilling projects that are being cancelled due to the price collapse.  Big projects that would start pumping oil and natural gas five to ten years out are being canceled or put on hold as the price crash forced spending cuts amounting to $115 billion. But wait, there’s more!

Will Future Wars Be Fought Over Water Rather Than Oil?

HamaltonPoolTX2 Hamilton Falls & Pool Preserve, Texas

Introduction...Let’s admit it.  The two Iraq wars were to assure the free flow of oil to the United States and its allies. Oil is the lifeblood of any modern economy.  Check for yourself.  Can you find anything in your house that isn’t made of petroleum, grown with petroleum, manufactured with petroleum, or shipped by petroleum products? I couldn’t find one single thing.

United States History of protecting Middle East oil supplies… The U.S. military has used force or the threat of force to protect energy interests primarily in the Middle East for more than five decades.  The cost the American taxpayer in the Persian Gulf just between 1976 and 2007 was $7.3 trillion.  This policy was formulated during World War II when the U.S. battled with Japan over the shipping choke points in the Pacific.

But wait, there’s more!

U.S. Battles Opec Over Expansion Of Oil Output

H&P Drilling Rig, Midland, Texas

Introduction…American drillers increased oil production at the highest rate in a Century in 2014 despite falling prices.

Opec’s efforts fail… to slow down the pace of growth of America’s oil industry last year, according to new data which revealed that drillers in the US increased production at the highest rate in more than 100 years.

The US government’s Energy Information Administration (EIA) has said that output increased by 1.2 million barrels per day (bpd) last year to reach 8.7 million bpd. This is the largest single increase since records began in the early 1900s.  America’s oil production has surged against a backdrop of volatile markets since the Organization of Petroleum Exporting Countries (Opec) effectively launched a price war in November by agreeing to leave its output quotas unchanged.

But wait, there’s more!