The mass media seems to make it look as if Russia will be the only ones getting hurt by the falling oil prices.
The shale oil industry will not go broke. Some individual companies probably will, but that always happens. Most companies will stop growing production. And when oil prices rise again, new producers will appear. The drilling rigs don't disappear just because prices go down.
Many hedged their production. Others have a longer term viewpoint. Total cost is not the cost of production. Drilling the well is a sunk cost. Building the road is a sunk cost. IF you are redrilling an existing well, the cost is not as much as the initial drilling. There are too many variables for a one size fits all scenario. Fewer new wells will be drilled while oil prices are down, but wells will be drilled. T Boone Pickens recently stated that within 12-18 months he sees oil back to the $80-$95 price range. Friday and Monday I bought LNCO. Almost bought more today, but prices turned around when I was busy. $9-11 for a stock paying $2.90 dividend is hard to pass up. If LNCO cuts the dividend, the payout should still be at a very high rate based on the current share price. And if they don't cut the dividend, my payout rate will be over 28%.
Just read an article about Russia and the Ruble. http://www.slate.com/blogs/moneybox...ruble_is_in_freefall_thanks_north_dakota.html I think it is more than just North Dakota oil. Could OPEC be trying to push Russia into a financial meltdown? Also how long can the U.S Shale sites stay profitable? Already heard guys talking about how people are loosing jobs in the Dakotas. I read a few can go as low as mid 30s.
Win-win-win for Saudi Arabia. They simultaneously hurt Iran (Shia), Russia (Shia ally and blocking natty pipeline) and the US fracking industry.
The shale oil industry in the USA is running on borrowed money... Junk bonds a lot of them.. Some of THE SHALE OIL STATES in the US will find it very hard to stay in the black. My tip is oil back to over $80 US a barrel by June. Regards Errol 43
Cheaper oil on the markets. I can't see cheaper gasoline prices. I can't see any airlines promoting "cheap tickets, low oil price deals" :lol: To the ordinary person, it's still quite the same.
Oil in the mid-50's. I can't believe it! 80-90 seemed crazy. I think we can expect massive gold and silver price smackdown next year.
I'm not sure wot you mean about gas prices not coming down? Pump prices are down as low as $1.15 per litre in Melbourne!
They may be priced out of the market. If they can't service their loans, who will be holding the can of debt? Shareholders? The Banks? Looks like a trigger for another toxic debt scenario and a trigger for another GFC. :|
Some of the well owners and drillers will go out of business, but the wells and drilling rigs will still be there. As long as the oil price exceeds the marginal cost of production, they will pump. They may not drill new wells, but they will pump the existing ones. Holdfast, Junk bonds are about $200B of the high yield market. That isn't enough debt to create another GFC. This is the boom-bust cycle of capitalism at its finest. http://www.zerohedge.com/news/2014-12-16/great-unwind-oil-and-gas-junk-bonds-defund-fracking
The Rockefella's timed it beautifully in September 2014 when they did the honourable thing and sold 50b of their oil interests. Of course this was all based on the global concern of climate change. Interesting how oil prices fell off the financial cliff shortly after - "Well timed old chap"... http://www.theguardian.com/environm...ller-heirs-divest-fossil-fuels-climate-change "Cause and Effect" -I guess we will have to wait and see the desired effect and on whom?
We could see oil down into the 30's before all this is over. It is very bad news for the oil producing countries as their budgets will be hammered.
