wildbourgman wrote:Let me expand, I know guys that do a certain job in the oilfield (deep-water) that didn't even exist 10 years ago and could probably go away today and no one would really blink and eye. High school grads in their early 20's doing this job were making $250,000 or more per year, that's just not normal. So when you see things like that you might feel a top is near.
Circa 1983 or so, before the bottom fell out in 1986, I was making about 110K a year gross. As a 20 something (albeit with a college degree) and it seemed perfectly normal to those I worked with who were also 20 somethings, working offshore in the GOM. In today's dollars that's about $270G, so I wouldn't all tied up over it, it is the oil field, and unlike many other industries nowadays doesn't suffer those who don't want to work, can't pull back to back towers, I'm sure it has become more sissifed but that is the way of the world seems like. Now, it took a few years before that top was reached, but why the top was reached had nothing to do with recession or collapse or whatever the story of the day is now, all these years after peak oil.
The single most telling factor is that the Permian is increasing in production rate, at $50/bbl, and the USGS just quantified the amount of oil in that basin in a single continuous formation to keep those rigs running for decades.
How that plays out is anyone's guess, but the Saudi's don't appear to be pulling the brakes on their production yet, and the current price moves reflect it.
wildbourgman wrote: Now, I did believe that our demand growth in the west didn't comeback from 2008-2009 periods. That's just from some charts that I was looking at back then. I also believe that QE and debasing currencies in the west could have had something to do with artificially high prices. Along that same line I think we now know that cheap money lured or even forced money into the "Shale Miracle" that otherwise may have not went there if we would have had higher interest rates and no QE. But mainly my gut told me something was wrong, that's about it and I'm way to risk averse (chicken shit) to make the kind of bets that make people rich.
Shale is not a miracle. It is a type of sedimentary rock that has been known to contain oil and gas since early in the 1800's. And money is never "forced" to go spend itself, but as Rockman has alluded to on multiple occasions, the oil and gas business is a great place to attempt to invest it, because when its good, its great, and when its awful, there are people still trying to convince you it is good. Don't know what it is about the business, the TV shows, the idea of old "oil" money, don't know, can't say I care. Capital will flow where it believes it can find the best risk adjusted return. If it doesn't go to the oil folks, they'll do the same thing they've done countless times before when they want to drill a well..they'll sell something, save some cash, and bootstrap themselves into more production. Or not, and go bankrupt. They do that as well. And I think it has been firmly established now that if the global supply/demand balance price is $100, US drillers are going to find the money to make more money, and just as before, will do more of it than they need to, and crash prices, just like they have before. The cure for cheap oil is cheap oil. The worm will turn, the only question i when. After all, the one thing the industry can count on are the normal folks, and the folks right here on this forum who should know better, to keep right on using petro-chemicals in their various forms.