I think everything you say about this is absolutely true but I don't think it will stay true in the future. Companies with oil in the ground but with cash flow problems will be able to attract investors for a small share of the reserve rather than a complete selloff. It would be foolish (and unnecessary) to sell off any reserve for less then it's worth ten years in the future. It has been in the ground for millions of years so a few more will not matter.ROCKMAN wrote:Vt - Some valid points. But corporate debt is at an all time high. Even with current very low interest rates the oil patch already spends a big percentage of it's revenue to over debt. This is how the scenario usually works out: if a company's cash flow drops (including from the unlikely event of voluntarily shutting in wells) it greatly reduces drilling activity since it's debt burden is a fixed cost and can't be reduced. There is one constant rule in the oil patch: the banker always gets his money. Go into default, get liquidated and the shareholders end up with far less than from a corporate takeover. Less drilling leads to lower reserve replacement which leads to Wall Street reducing stock value. Which leads to shareholder discount which leads to the almost inevitable acquisition by another pubco...the scenario that a company that ExxonMobil lives for. Trust me: upper management of Big Oil is constantly evaluating the M&A market for their next big reserve boost. I've personally experienced this drama a number of times in my career. Both as the predator and the prey. And low cash flow (not low profitability) has always been the root cause. Cutting production might leave reserves in the ground to be sold for a higher price later. But they'll be sold at that time by the new owner...not the company that cuts it's production back voluntarily.
It depends on the ability of KSA to increase exports by a like amount. They always have before and will be able to right up until the day they can't. I don't expect to get much notice before KSA reaches it's limits. Of course we could ease sanctions against Iran and let them market more. Stranger things have happened.Armageddon wrote:How much oil would ISIS have to disrupt in Iraq for the markets to see disruptions? Rappier doesn't think it would take much to see $150.00+ oil
Pops wrote:My WAG is $150 is going to be hard to maintain for the simple reason we've seen it recently and folks will quickly cut back - of course that might be completely backwards. Since we're at least a little used to seeing $4+ unleaded we might figure we'll just bear with it for a few months.
Armageddon wrote:you think the last gasoline spike caused the last downturn in the economy?
Subjectivist wrote:Armageddon wrote:you think the last gasoline spike caused the last downturn in the economy?
I think it was a contributing factor, but not the whole story.
Peak oil does not occur when we run out of oil. Peak oil occurs when the marginal consumer is no longer willing to pay the cost of extracting and processing the marginal barrel of oil. And we can actually calculate what the related numbers are.
Armageddon wrote:Subjectivist wrote:Armageddon wrote:you think the last gasoline spike caused the last downturn in the economy?
I think it was a contributing factor, but not the whole story.
we are paying pretty close to that amount now. Within .30 anyway
Pops wrote:Armageddon wrote:Subjectivist wrote:Armageddon wrote:you think the last gasoline spike caused the last downturn in the economy?
I think it was a contributing factor, but not the whole story.
we are paying pretty close to that amount now. Within .30 anyway
Your question was did the "spike" cause the crash. The 12 month average price today is higher than it has ever been and it's been there for 3 years. It is simple logic that when prices rise fast and unexpectedly you are forced to pay the higher price and you must spend less elsewhere. So there is a good case to be made that all spikes in oil cause slower economic activity as cash is funneled into that one sector.
Armageddon wrote:Subjectivist wrote:Armageddon wrote:you think the last gasoline spike caused the last downturn in the economy?
I think it was a contributing factor, but not the whole story.
we are paying pretty close to that amount now. Within .30 anyway
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