Oil Price Crash Continues to Ripple Through Economy

January 30, 2015

shaleplays

What the Oil industry has in mind for America, is that the entire country become something of a resource colony, with boom and bust cycles disrupting and ultimately impoverishing communities all across the continent.  If you look at the map of shale resources above, you can see that North Dakota is not the only target by a long shot.
For now, the Oil price roller coaster is disrupting that plan.

Washington Post:

They threw a fracking party in Illinois, and hardly anyone showed up.

More precisely, two months after the state completed a long regulatory process and opened the door to hydraulic fracturing, only one company applied. The state hired 36 employees and five lawyers to handle the expected rush of applicants, reported the Chicago Tribune, “for work that doesn’t exist.”

This after a land rush by energy companies in Southern Illinois that saw them buy tens of thousands of acres anticipating a North Dakota-style energy boom that would create 10,000 jobs.

The disinterest is attributed to the sharp decline in oil and gas prices globally, which makes fracking unprofitable — at best a break-even proposition, at worst a big money-loser.

“Smart people don’t invest in things that break-even,” said energy expert Arthur Berman in Oilprice.com. “I mean, why should I take a risk to make no money on an energy company when I can invest in a variable annuity or a REIT that has almost no risk that will pay me a reasonable margin? Oil prices need to be around $90 to attract investment capital. So, are companies OK at current oil prices? Hell no! They are dying at these prices.

Oil prices these days are in the $49 range for Brent crude, the global benchmark, and $47 a barrel for West Texas intermediate crude, the U.S. benchmark — 30 percent and 40 precent lower, respectively, than the prices two months ago, according to Reuters.

Anti-fracking groups can’t contain their glee. Annette McMichael, a spokesman for Southern Illinoisans Against Fracturing Our Environment, told the Associated Press her group “believed all along the price of oil is not going to be sustainable, and once it fell the fossil fuel industry would be leaving Illinois — or at least putting hydraulic fracturing on hold. … We certainly hope oil prices stay depressed for 2015, which is a good possibility.”

But maybe Southern Illinois should be grateful. North Dakota became the Saudi Arabia of North America thanks to fracking over the past few years — and now may go bust.

 

 

 

2 Responses to “Oil Price Crash Continues to Ripple Through Economy”

  1. redskylite Says:

    Mass layoffs are depressing times, and if the low oil price has caused that then it is a pity, I see IBM are chopping heads at the moment, I didn’t think they were affiliated to the oil industry, in fact I thought the reverse was true.

    I left the aerospace manufacturing industry in the UK in the 80’s tired of mass layoffs at that time under dear Mrs Thatcher, and ironically ended up in the oil exploration and production business myself.

    Now I’m keen on climate change mitigation, I am interested in sustainability, I am not a communist, but I would hope our economists could create a more stable working world. In the early 80’s trade unions were fighting for reduced working hours and a better life for all, alas they seemed to have gotten buried and forgotten.

    Thanks Mrs Thatcher and Mr Reagan.

    The IBM Axe Starts Chopping–Widespread Layoffs Begin

    http://www.forbes.com/sites/benkepes/2015/01/28/the-ibm-axe-starts-chopping-widespread-layoffs-begin/


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