Moon of Alabama Brecht quote
April 11, 2020

How The Coronavirus Killed The Shale Industry

The answer to the question OPEC++ or a dead shale industry? is in.

The shale oil industry will die. I may come back in the future but that will be years from now.

The coronavirus pandemic has cut oil demand from 100 million barrels per day to some 75 Mbpd. Oil prices have fallen from $60 per barrel to $20/bl.

On Thursday OPEC+, the original oil producer cartel plus Russia, agreed formally to cut output by 10 million barrels per day. The real promised cuts would have been smaller. But the agreement depended on the commitment of all OPEC members.

Mexico did not agree to a cut. The country has hedged nearly all its oil exports:

Mexico, the world’s 12th-largest producer of oil, has hedged much of its 2020 output — that is, agreed ahead of time to a set price, reportedly about $49 a barrel. That practically eradicates any incentive Mexico might have to go along with production cuts this year.

At $1.3 billion the hedge was expensive for Mexico. But it guarantees that its budget for this year is fully covered. Mexico also redirected parts of its export to its own refineries to produce gasoline which it would otherwise have imported.

OPEC+ had also expected that other producers, the U.S., Canada, Brazil, would agree to cut their production by 5 Mbpd. Together with the 10 Mbpd from OPEC+ that would have helped to keep the oil price from sinking further. Yesterday a meeting of the G-20 countries was held to discuss the issue. None of them commited to hard cuts or quotas. Canada denied Russian assertions that it would cut 1 Mbpd. The U.S. rejected cutting more than what was already shut in for a lack of market. There will be no OPEC++.

Yesterday Trump talked again with Putin. He was told that there is no deal without Mexico and the other American producers committing to one. Trump then promised to somehow make up for Mexico:

By Friday afternoon, Trump was suggesting the U.S. falloff was sufficient to cover Mexico’s burden, as well — apparently without any sort of presidential order or quotas imposed by Washington.

It is questionable that OPEC+ will accept Trump's assertion as being equal to an official cut of Mexico's output. There is then no deal. While the OPEC countries will claim to stick to their official quotas to avoid U.S. pressure everyone will cheat and try to sell as much as possible.

Russia, Saudi Arabia and other Gulf countries may still cut some production. But the reason for that will not be Thursday's OPEC+ deal but a lack of demand and no room left to store surplus oil.

It means that the price of oil will move below $20/bl until demand comes back from its current 75 Mbpd to above 90 Mbpd. That can only happen when the coronavirus pandemic has ebbed, when the quarantines have ended and air traffic resumes at a sufficient rate. That point will probably come two years from now. But the effects of the global depression the pandemic will cause will take even longer to heal. When demand finally comes back to previous levels a rise in oil prices will still be much delayed because all storage is now full and must be sold off before more crude production can go back online.

U.S. shale oil was marginally profitable above $45/bl. That price is out of reach for the next to three to five years. That is much longer than the shale oil companies will be able to finance themselves. U.S. banks, which have loaned billions to those companies, are already getting ready to seize their assets. The banks will lose most of the $100+ billion they invested in shale companies. 

Canada's expensive oil sand production is also unsustainable under the current prices.

The oil industries in North America had been free riding on the previous OPEC+ deals which limited production in countries which can produce at much lower costs. The artificially upheld prices have broken down and there is no way that they will come back any time soon.

This is a catastrophe for the labor market in the U.S. oil patch. Especially as the job losses will come on top of those in other services and industries.

It is also catastrophic for those Persian Gulf countries that depend on oil sales to finance their budgets. Iraq will be hit very hard and the lack of money may cause it to fall apart. The Saudi 'royals' will no longer be able to finance the welfare state that has held down any serious challenges to their ruling.

Alternative energy producer may also become a casualty of lower oil prices as they are no longer competitive. With low gasoline prices electric cars will lose their advantage of cheap electricity.

Trump had argued for a disengagement of the U.S. from the Middle East as the U.S. had achieved independence from foreign energy. With the shale oil industry on its death bed the U.S. will again have to import oil from the Middle East. While Trump's disengagement was never fully carried out the new situation may lead him to change his strategy.

Posted by b on April 11, 2020 at 18:36 UTC | Permalink

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So, the US military will be very active in securing oil the US may need or want, but will also prevent other nations from accessing their oil.

The big reserves in Venezuela become very enticing now.

And poor Iraq definitely will have to fight a war against the US. Syria already knows it will be fighting soon to get control of its oil.

Logically, the easiest thing for the US is to dump the Kingdom and take the Saudi oil.

Lots of options for the Hegemon.

Trump's maxim: Take the Oil, soon will be national security policy. America First! MAGA. And all that Exceptional stuff.

Posted by: Red Ryder | Apr 11 2020 18:48 utc | 1

US Shale industry will not be allowed to collapse completely. If no deal with OPEC can be reached, look for war in the Persian Gulf. That would drive oil prices back up to where US Shale would be profitable again and it would avoid the unraveling of the derivative bomb.

US moves towards Venezuela and it consolidation of its forces in Iraq should be seen as preparatory moves for a war with Iran. The math has now changed in Washington...

Posted by: Bob | Apr 11 2020 18:52 utc | 2

WTI @ 22.76 this morning. That's not only going to drive shale out of business, it's going to take a big bite out of the majors as well. Peak oil is back on the table, and probably here to stay.

Posted by: Trisha | Apr 11 2020 19:20 utc | 3

>The big reserves in Venezuela become very enticing now.

Alberta is much closer, connected by rail and pipelines, and they are desperate to sell their crappy bitumen that no one wants. There's no need for Uncle Sam to steal Venezuelan oil and I doubt US really wants it. But Venezuela must be punished for disobedience, just like Cuba and elsewhere.

Anybody remember a few years ago there was a media campaign to promote Canada's "ethical oil"? I guess it didn't work so well, since recently they were selling Western Canada Select for $5 a barrel.

Posted by: Trailer Trash | Apr 11 2020 19:23 utc | 4

The banks will take over ownership of the oil wells and be simultaneously bailed out. The large oil companies will also be bailed out. The small companies will be SOL.

Posted by: Gareth | Apr 11 2020 19:23 utc | 5

> Peak oil is back on the table

Ha, ha, ha, ha, that's a good one! Various con artists have been promoting that idea since the day after the first refinery opened. It used to be that Peak Oil! would drive prices to infinity. Now they are saying it will drive prices to zero, then to infinity, or some other crazy prediction? Too funny.

(note: I didn't read the linked article - couldn't be bothered, today I'd rather bloviate!)

Posted by: Trailer Trash | Apr 11 2020 19:32 utc | 6

The USA has tried unsuccessfully to get their hands back on Venezuelan Oil.
Don't think they will be successful.
This is not an issue that capitalism understands.

Posted by: Duncan Idaho | Apr 11 2020 19:36 utc | 7

Low oil prices, in isolation, aren't bad news for the USA as it is also the largest oil consumer. So, whatever it loses in the producing end it gains in the consumer end.

What makes those low prices bad news for the USA is the addition of another ingredient: consumption in the USA is also low (since 2008).

The true winner here is China. The moment the oil crisis became imminent, it outright ordered its oil companies to lower production. Yes, theoretically, this is bad, because it would lose market share - except for the fact that it consumes all the oil it produces. And who's the owner of the Chinese oil sector? The Chinese government itself. So, as it lowers production, it gains either way.

Meanwhile, it can continue to import gargantuan quantities of oil at extraordinarily cheap prices and sell at the Chinese market at constant prices. The Chinese people wins two ways: 1) its own nation will emerge geopolitically stronger when the pandemic is over and 2) lower taxes: the government, as owner of the means of production, can afford to constantly lower taxes on the working classes. It has already cut taxes in this pandemic.

Russia must seize the opportunity and reindustrialize. Putin already admitted his administration's mistake during the commodities' boom of the 2000s in 2016 Q&A, so I hope he uses whatever the Russian government has at its disposal to try to go back to the glory days of the USSR. The clock is ticking, so he must act fast and decisively.

Posted by: vk | Apr 11 2020 19:42 utc | 8

"Russia is going to win. They have superior rock. They are and have been the very last people we should be sanctioning or turning into an enemy, because it will be their oil that feeds us someday, soon."

Posted by: Duncan Idaho | Apr 11 2020 19:54 utc | 9

Not only the US shale and Canadian tar sands are threatened. A big chunk of global dollar finance relationships, and the financial superstructure built on the assumption of the recurring oil dollar flows, would start to unwind. Not all, not immediately, since most oil is not traded on the market but contracted ahead by years - but it's a big deal.

Thus I wonder if the Trump admin may actually try genuinely hard to get Canada and Mexico to join in a deal, and pressure some other producers like Iraq etc. It will certainly not save Canadian oil, they're the deadest. US shale is going to get cut to a fraction of its current size. However it can also come back more quickly than others when the time comes.

This experience will also unfortunately kill pubpic transportation in the US for another generation. The electric car industry fluffers will do all they can to help. Ride sharing via driverless cars, on the other hand, will hopefully get abandoned at last.

Posted by: ptb | Apr 11 2020 19:55 utc | 10

I would think that Saudi oil is easier to control than Venezuela.

SA is somewhat a puppet government currently but is threatening actions that conflict with empire goals.

Who would stand up for SA if empire installed a more compliant "government"?

Posted by: psychohistorian | Apr 11 2020 19:58 utc | 11

I don't follow the logic of Red Ryder.
No doubt I am missing something but why, when you can barely give oil away, would the US suddenly want to acquire total control over middle eastern and Venezuelan deposits?
Bear in mind that, as b points out, the only course to take with such oilfields would be to close them down, because there is no place to store their products.

And then there is the question of whether the US, if it so desired, could take over Iraq and Saudi Arabia. I don't think that they can. And, if they were to do so, pushing the currently compliant governments aside, they would be saddled with a lot of very angry, very hungry people.

I had been hoping that, now that oil is at a discount, there would be an end to the crude materialism of arguing that all foreign policy is motivated by a desire to control oilfields. The truth is that oil is there for the taking at about $20 a barrel. And when/if the price goes up again other energy sources will become economical.

The real story here is that a lot of people are losing their livelihoods and this will have consequences: they may turn to other things, subsistence agriculture for example, which will affect ownership patterns. Take Venezuela, for example, oil is no longer going to buy imported groceries for sale or distribution. Food production will therefore be developed locally, which will lead to competition for land now in the hands of the rich. US sanctions have already forced the government down this road.

The room for manoeuvre that oil has afforded the Saud family will be narrowed: the people will have to look after themselves.

Oilfields attract migrant labour: in the middle east there are hundreds of thousands of foreigners dependent on oil revenues to sustain them. Most of them will be going home-that will have consequences.

In Canada, to take one small example, the eastern provinces have been sending people west to Alberta's oil fields for a long time. Mining the oil sands is relatively labour intensive- a lot of people are going to be out of work for a long time. The industry that has bankrolled Canadian conservatism, in its most extreme forms, is now lined up with a begging bowl looking for the very welfare, governmental assistance, that it has been sneering at for generations. That is going to change. Eventually even the greedy bureaucratic fools running the NDP will wake up and see that times have changed-the neo-liberalism that they have espoused is no longer sustainable. New ideas will be required.

The Times are changing. And not because the ruling class wanted them to.

Posted by: bevin | Apr 11 2020 20:01 utc | 12

thanks b... i agree with your view, except i am not sure how it works out for iraq and ksa at this point... i agree with @1 red ryder... the usa has to consider dumping ksa..

@ 4 trailer trash.. the alberta tar sands has a similar cost to break even in canuck $ - 45us$ = about 60 canuck dollars.. alberta is screwed here.. the easiest thing for the usa to do it to take ksa's oil... i think it is a bigger problem to try taking venezuala, but all of it amounts to a war of aggression on the part of the usa at this point.. not sure where they go from here... and, it would be wall st that sold the hedges for the oil price to mexico too... mexico is looking good for at least the next year...

Posted by: james | Apr 11 2020 20:04 utc | 13

It seems, yet again, that they magically and mysteriously managed to not be able to find a way to run out of oil.
This is certainly an eye opening revelation.
Again, still,...
Bigly...
Whodathunkit?...

Posted by: Joshua | Apr 11 2020 20:10 utc | 14

@12, Bevin

The US without shale oil is dependent on foreign sources for its energy needs.
Thus, control of other sources is a national security issue.
The DOD is the biggest fuel user on the Planet. The military, as well as the US nation, must have their oil supply under their control.

If the US controls large supplies, it can influence the price and the use of the Petrodollar. These are critical tools of hegemony.

Beyond the US petroleum strategic reserves, the US military has depots all over the globe that can be "filled" to the brim. And the US has ships, boats, planes and land vehicles all of which have fuel tanks to fill with fuels. So refineries all under US control or influence can move the crude into fuel supply.

If the US military had to take control of Iraq, they could do that. There's a price, but that is not difficult. Iraq's government is already totally corrupted by US dollars.

And you don't need to control a country in order to fleece it of its oil. Note how Syria has lost its oil fields to the US and the Kurds.

The question now is Trump's and he is filtering every decision through his view of re-election and a second term.

He has a panoply of chimeras to point to for the loss of good jobs in shale and fracking. The Chinese, the Saudis, the Russians, OPEC, and the bankers who will be taking over the oil producers who default on their loans are all "to blame".

These shale and fracking jobs are all in the "red" states he needs for re-election. But those states might not bolt away from him if he gets the unemployed significant unemployment money.

He desperately needs a Trillion or so for Infrastructure projects. Then the oil field workers and truckers and welders can go to work on those new projects. His original plan was to use bonds invested in by foreign investors and patriotic Americans. He's finally talking that way again. Question is will Congress move fast enough to save the economy.

Or will Trump move against "easy pickings" for its military?

Posted by: Red Ryder | Apr 11 2020 20:26 utc | 15

Before b or anyone thinks of shorting oil stocks here are some of the latest WTI oil futures contracts in $US/barrel:

Dec 2020 - 34.73
Dec 2021 - 37.16
Dec 2022 - 39.01
Dec 2023 - 40.41
Dec 2024 - 43.00

https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html

Posted by: krypton | Apr 11 2020 20:36 utc | 16

President Trumpy and the Fed already have a plan!!..."Money Printer Go Brrr"..!!!

https://www.youtube.com/watch?time_continue=2&v=O1hCLBTD5RM&feature=emb_logo

Posted by: Gregory | Apr 11 2020 20:39 utc | 17

Pretty basic lack of understanding of modern peak oil theory going on here. We are not running out of oil. We are running out of cheap oil as we have a net energy or energy return on energy invested problem. The price needed to fully access all necessary oil resources is too high to support current levels of economic activity. All recent events have only proven the validity of the concept and the debt binge of the last generation has simply papered over a physics problem with monetary alchemy. The shale oil and tar sands scams exploding are proof of concept. Spend a bit of time with Tim Morgan's work on surplus energy economics.

Posted by: sad canuck | Apr 11 2020 20:39 utc | 18

The biggest reason for the low price of Alberta oil is the fact that there is a massive glut of it due to lack pipeline capacity. That is some thing Alberta has been living with for going on a decade now. It has meant that the US has been getting Canadian oil dirt cheap. If Alberta can get it's oil to tide water rather than having to send it to the US it will fetch a much higher price. Over the last 5 years the discount due to that capacity limit has been about $20 a barrel. Alberta had already shut in a large amount of it's supply rather than giving the oil away for free due to this.

A good part of that problem will be alleviated with the completion of the upgrade to the Kinder Morgan pipeline within the next year. That will take a lot of the sting out of what is currently going on. Also keep in mind that unlike a fracking play that has a short payback horizon, oil sands are very long term plays done by giants with deep pockets that know there will be ups and downs over the term of the mine. Neither the Saudis or the Russians are going to want to keep prices where they are for a decade. I suspect in 6 months they will be looking for another cut. The next year will be very ugly for Alberta but it has been through this exact game before and survived and will again.

Posted by: BraveNewWorld | Apr 11 2020 20:43 utc | 19

I agree with psychohistorian #11. Trump may go after SA. With these oil prices they are on the edge of bankrupcy. Most of the oil money has been invested in US industry and weapons, but when they have nothing left to invest, when they attack us shale by flooding the market with cheap oil, they become a nuisance. There is a lot of dirt to be trow on the royal family, 911, supporting ISIS, etc. Trump could support the other side and cause more Houthi attacks on SA oil infrastructure, support anti-government protests, etc. Regime change is easy, if only Trumps zionist friends would support that.

Posted by: Joost | Apr 11 2020 20:45 utc | 20

Bevin #12

Thank you for a clear explanation of Canadian politics. I have viewed Canada as being highly dependent on global mining so I guess an economic downturn is a double blow.

Posted by: uncle tungsten | Apr 11 2020 20:49 utc | 21

There will be no invasion of Venezuela. There will be no occupation of Syria. The US will withdraw from Iraq.

At current oil prices, the occupation of these countries is not profitable. The occupation army costs more than the petrol.

Posted by: passerby | Apr 11 2020 21:04 utc | 22

Shale will be put to bed for the most part, it will not disappear entirely. Eventually the covid crisis will end and people will get back to work. The oversupply will be slowly worked down and the price will slowly move back up.

There will be much pain in the meantime in countries that depend on oil dollars as income. This could last 18 months and maybe a few or more years before shale comes back in any meaningful form.

Oil patch workers had a great ride and made a lot of money. Do not feel sorry for them. There could be some major chaos in countries that depend on those dollars.

The DOD purchases something like 100 million barrels of refined product per year...
The US military oil consumption

Posted by: dltravers | Apr 11 2020 21:09 utc | 23

Trailer Trash @ #6

The apparent anomaly of wild swings in the price of oil as peak oil recedes into the past is clearly explained in JM Greer’s “The Long Descent”; there are plenty of fair reviews of Greer’s arguments available.

Posted by: Cortes | Apr 11 2020 21:13 utc | 24

"Peak oil is back on the table"

We had a 'peak oil' for global production in 1979. It lasted 17 years. We may have one now but won't know it for at least 20 years. Not that it matters in the least now. The bad thing about peak oil, if it occurred, would be the rapidly rising costs afterward. That's out of the picture for the foreseeable picture.

Posted by: David Wooten | Apr 11 2020 21:23 utc | 25

"There will be no occupation of Syria. The US will withdraw from Iraq.

At current oil prices, the occupation of these countries is not profitable. The occupation army costs more than the petrol."

Syria does not have much oil; it's valuable to their small economy but nothing to US. We're there because Netanyahu wants US to stop the Iranians from sending arms to Hezbollah.

And, we're in Iraq for logistical support to troops in Syria, among other reasons.

Posted by: David Wooten | Apr 11 2020 21:28 utc | 26

The question not answered (?) is what happens to the petrodollar.
While the shale fracking industry is going to get decimated (more like quartimated), it is still going to be producing oil for at least the next 2 years. Overall US production will start falling off but won't return to pre-fracking levels until the existing wells have experienced decline.
But, the US continuing to "go its own way" combined with its relative lack of need for oil imports means there grows ever less reason for the petrodollar. So far, MBS is holding the line due to Trump - but geopolitically and economically, China is Saudi Arabia's future. Ditto Iraq and Iran.
And China can extend its economic hand to help with Saudi Arabia's budget problems - it is a good long term way to hedge China's ongoing short term and medium term oil needs.
Would China want to lend to Saudi Arabia in USD, and pay for oil in USD? Seems unlikely...

Posted by: c1ue | Apr 11 2020 21:38 utc | 27

Before b or anyone thinks of shorting oil stocks here are some of the latest WTI oil futures contracts in $US/barrel:
Posted by: krypton | Apr 11 2020 20:36 utc | 16

Do you understand the CME group WTI oil futures contracts - how Options trading - Puts (shorting) & Calls (going long); Oil Producer Hedging to protect Sales pricing works ? Obviously not.

As oil sinks, some companies float idea of 'zero clause' in trades

LONDON/NEW YORK (Reuters) - After the worst quarter for oil prices in history, some oil producers have begun to include protection in their contracts to avoid being forced to pay buyers for the oil they pump if prices slide below $0 a barrel.

Crude prices in key physical markets - including the United States, Canada, Mexico and Europe - have fallen through $10 a barrel, far below comparable futures prices, as demand slumps and storage fills. Those discounts could widen even further, making it possible that outright physical prices could fall below $0 per barrel.[.]

We are at the end game. Anyone thinking that in the next 18 months life will return to January 2019 status is delusional.

Government leaders are desperately printing $$$ by Trillions to avoid a Depression.

"to Avoid a depression" is how one G7 Minister of Finance framed the current economic shock. Yes, shockingly, he used the "D"-word.

Posted by: Likklemore | Apr 11 2020 21:40 utc | 28

I don't intend to rewrite some of the thousands of words I've devoted to the topic of oil over the past 20 years as they've clearly made little impact on the minds of most barflies, although some sentences just can't be avoided.

Outlaw US Empire shale oil was a political con from the outset, being both a jobs program and Ponzi Scheme satisfying political goals; both will now end with mild to severe consequences depending on where one is in the con.

From the standpoint of the Climate Crisis, a Global Depression is good news as it means drastic reductions in carbon pollution.

Economically, the fundamental issue of food production and its equitable distribution globally is the primary issue aside from the pandemic, IMO. Solving the distribution problem means harnessing all the Central Banks for Public Purposes, dismantling the vast majority of the Casino Economy, and deep sixing Neoliberalism for all time. In other words, disempowering the Money Power and putting an end to the Class War in favor of the global citizenry instead of a few hundred elites. Those few won't like that initially, but over a few generations, they'll adapt.

Unless one's head's buried in sand, mud, asphalt, or elsewhere, the world requires a new economic formula acknowledging the fact that aside from sunlight, all resources are finite making infinite economic growth impossible along with an ever expanding human population. Some form of Steady-State arrangement having equitable distribution of necessities is the only logical option. War, strife, turmoil, chaos, and possible extinction are the alternatives.

Shale oil's demise is great for those nations not yet savaged by its practices. Good Riddance!!

Posted by: karlof1 | Apr 11 2020 21:48 utc | 29

Having threatened, and now in desperation:

11 U.S. senators hold call with Saudi officials urging them to put oil cut in motion

WASHINGTON (Reuters) - Republican U.S. senators from oil states who recently introduced legislation to remove American troops from Saudi Arabia said on Saturday they had spoken with three officials from the kingdom and urged them to take concrete action to cut crude output.[.]

There were 11 Republican senators on the nearly two-hour call, including Bill Cassidy, who introduced legislation last week to remove the U.S. troops in 30 days, a month faster than the previous legislation.

They spoke with Saudi Arabia Energy Minister Prince Abdulaziz bin Salman, Deputy Defense Minister Khalid bin Salman, and Saudi Ambassador to the United States Princess Reema bint Bandar bin Sultan.

Sullivan, of Alaska, applauded Saudi Arabia’s taking part in the agreement to cut output, but said “actions speak louder than words.”

“The Kingdom needs to take sustainable, concrete actions to significantly cut oil production, and it needs to do so soon,” said Sullivan. Saudi Arabia’s action to boost production during a pandemic was “inexcusable” and “won’t be forgotten,” the senator added.

The United States, the world’s top oil producer, is gradually cutting about 2 million bpd of output as reduced demand and low oil prices force some heavily leveraged producers into bankruptcy.
[.]

Poor babies. Heavily indebted shale sector meets demand shock triggered by a Virus labelled a hoax. Oh the irony, "We don't care about OPEC" said by Trump less than 7 days ago

Posted by: Likklemore | Apr 11 2020 21:57 utc | 30

@ Posted by: Red Ryder | Apr 11 2020 20:26 utc | 15

You rise an interesting question: what does "infrastructure investments" mean for the USA nowadays?

When capitalism is booming, it is easy for the capitalist class to determine where to invest: they will go for the highest profit rates. When profit is plenty, everything is good investment, and all sectors expand and flourish in a virtuous cycle.

But when there are no profits to be made, what do you think the USA would do with USD 1 trn in hands? What do you think would happen? The obvious answer would be to simply rebuild and fix what already exist. But that would not trigger a development of the productive forces in the country: it would simply keep the USA where it already was in 1960s.

So, the USA has the same dilemma Cold War ideologues said only the USSR, with its planned economy, could have: an inability to know how to allocate its resources because the economy (allegedly) became too big and too complex. But that was never the problem with the USSR, as it is not the problem with the USA today: the underlying problem is that a given sociometabolic reproductive system has reached its logical conclusion.

There's still a lot of heated debate about if the USSR could or could not be reformed, so we can't really know exactly when a given society has reached its full potential and therefore its collapse stage. I'm sure the debate is only beginning in the USA (and its periphery).

Posted by: vk | Apr 11 2020 21:59 utc | 31

"With low gasoline prices electric cars will lose their advantage of cheap electricity."
This is approximately true, firstly, only for countries where few taxes are levied on the price of oil and, secondly, is not the decisive aspect in the introduction of e-cars. Meanwhile, significant sums of money have already been invested; in China, the state is promoting e-cars massively, not because of the climate, but because of the air quality. The batteries are getting better and cheaper every year. In Europe, the CO2 emission limits can only be met by car companies if an ever larger part of the fleet is electrically powered. And so on.

I really hope that the rest of your predictions prove to be reliable.

Posted by: Pnyx | Apr 11 2020 22:09 utc | 32

"Trump had argued for a disengagement of the U.S. from the Middle East as the U.S. had achieved independence from foreign energy...the new situation may lead to change his strategy."

U.S. Shale production enabled U.S. adventurism because we no longer had to negotiate with Iran, Venezuela, and to some extent even Iraq because we did not need their oil on the world market. U.S. officials and neocons gloated and revelled over this new reality. So I guess it depends on what the definition of 'engagement'. If one means having to compromise then yes this is true. If one means actually taking advantage of the fact that we can mind our own business, then no, we have become even more obnoxious, certainly compared to Obama.

B, don't take this personally. This is a pet peeve of mind and I am furious over my country's horrible and unnecessary aggression as well as the fact that I am now praying for the retrenchment of the U.S. oil industry.

Posted by: Christian J Chuba | Apr 11 2020 22:26 utc | 33

Trump very badly wants to get reelected in November.
So it is not only the oil that he needs to bring into play.
Expect a war (with Iran? Venezuela?) sometime soon, to lock the public in behind him, especially as more recent polls are not so good for Trump anymore.

Posted by: Booleanbach | Apr 11 2020 23:25 utc | 34

I don't understand all these comments that the USA will move to "control" Venezuelan/Saudi/Iraqi/Iranian oil in response to these unsustainable (for its own shale industry) prices.

No need to invade and occupy. All the USA needs to do is to engineer a war with one or more of them so the USAF can bomb the refineries/pipelines/ports/whatever.

That will then drive up the price of oil to a level that returns shale oil to profitibility, and no US serviceman needs to die.

You won't cut production by 10%? OK, we'll cut your production by 100%
Nothing personal, you understand. It's just business.

Posted by: Yeah, Right | Apr 11 2020 23:43 utc | 35

Posted by: Duncan Idaho | Apr 11 2020 19:36 utc | 7
"Russia is going to win. They have superior rock. They are and have been the very last people we should be sanctioning or turning into an enemy, because it will be their oil that feeds us someday, soon."

Duncan, who are you quoting?

Posted by: Paul Atreides | Apr 11 2020 23:43 utc | 36

@12 Bevin

You make a good point, which adds up to deglobalization, intentionally or otherwise. This will only widen the gap between the real economy (local, low level, subsistence and petit-bourgeois, <90% of the population) and the imaginary economy (global flows of capital in finance, stock markets, futures, etc, less than 10%). The latter now operates in a fully self-referential universe where narrative and capital movements are enough to keep it insulated in a fairytale out of reach of any real tremors. We have been wondering why the finance economy never really suffers and when the chickens will come home to roost. Perhaps it's only when we all just finally ignore it as irrelevant to the reemerging small-scale of real life, and stop fetishizing the media-driven daily fascination with currency, stock-price, speculative plays and other BS that make latter-day heroes out of con-men and hucksters like Buffet, Fink and all the other ponzi-artists. The only way to reassert the hegemony over a real economy and a bubble-boy speculative universe is to ignore the latter and switch off the power (perhaps literally!). Then we can refocus on community building and restoring a circulatory redistributive economy rather than a predatory avaricious speculative nightmare.

Posted by: Patroklos | Apr 12 2020 0:05 utc | 37

Booleanbach @34

Not necessary. Trump already has the election locked up. If he needs a war he has the covid to declare one against. Some fireside chats, some memorable lines like "The only thing we have to fear is that we won't get fooled again!" and he will moonwalk past the poor befuddle Biden right back into the White House.

Most importantly, the oligarchy has come to accept Trump. They are satisfied with his performance. They are calling their dogs in the Deep State to heel, and without them to sabotage Trump he will breeze through the election pretty much unopposed.

If the US really wants oil production cuts they can always do that with a couple dozen Tomahawks targeting Saudi oil infrastructure... Just blame Iran afterwards and who would know any better? No need for a big expensive war.

Posted by: William Gruff | Apr 12 2020 0:11 utc | 38

Yeah, Right @ 35:
"Nothing personal, you understand. It's just business."
This. Easiest and cheapest way to accomplish the feat would be to upgrade Houthi weapons systems either from US stocks or via an under the table agreement with Iran via a wink and a nod. Tell the Houthis that if they knock S.A. out of the oil game in 30 days, we'll throw in a few shiploads of urgently needed foodstuffs, medicines, etc. This might lead to the breakup of the Kingdom, but that is a feature rather than a bug. Good times return/continue for US frackers and the Canadian polluters, and the really big banks who have loaned out too much money to poor business models are preserved and made whole again. What a deal.

Posted by: Donnie | Apr 12 2020 0:16 utc | 39

@ karlof1 29

Amen to that comrade.

Posted by: Patroklos | Apr 12 2020 0:20 utc | 40

I post links to ZH when I feel they add value here but will admit that ZH is more unbalanced than before since the first of the year.

At ZH the top story for most of today has been about a "documentary" showing, according to the title ,that the coronavirus came from Wuhan.

When will American and the much of the world wake up to manufactured narratives and events?

Posted by: psychohistorian | Apr 12 2020 0:28 utc | 41

With Andrew Cuomo possibly replacing Biden as the democratic candidate, Trump's chances to be re-elected are compromised. A
nyway who wants to be the president of a country possibly in economical depression?

Posted by: Virgile | Apr 12 2020 0:30 utc | 42

Posted by: Likklemore | Apr 11 2020 21:40 utc | 28

"Do you understand the CME group WTI oil futures contracts - how Options trading - Puts (shorting) & Calls (going long); Oil Producer Hedging to protect Sales pricing works ? Obviously not."

As I understand it the CME options chart shows options contracts to buy (in the case of call options) oil in the future at the specified price.

Is this not correct?

As well, the CME future oil options correlates with this:

Worldwide crude oil prices will average $33 a barrel for 2020 and $46/b in 2021. That is according to the Short-term Energy Outlook by the U.S. Energy Information Administration (EIA).1 The price estimate plummeted from the 2019 average of$64/b. The COVID-19 coronavirus pandemic has reduced global oil demand.

The EIA forecast that oil prices will average $23/b in the second quarter of 2020, but increase to $30/b in the second half of the year.

https://www.thebalance.com/oil-price-forecast-3306219

Posted by: krypton | Apr 12 2020 0:39 utc | 43

Psychohistorian @ #41

The documentary you reference was produced by The Epoch Times, whose main raison d'etre is demonizing the Chinese government. B wrote a detailed piece here a few months ago exposing who they are, and ZH with their anti-China postings of late seems to be sourcing more of their stories from there.
The Epoch Times however did some of the best and most in-depth reporting about the Russiagate psy-ops and the many players involved.

Posted by: Kabobyak | Apr 12 2020 1:25 utc | 44

https://www.history.com/this-day-in-history/the-u-s-invades-panama

The United States invades Panama in an attempt to overthrow military dictator Manuel Noriega, who had been indicted in the United States on drug trafficking charges and was accused of suppressing democracy in Panama and endangering U.S. nationals. Noriega’s Panamanian Defense Forces (PDF) were promptly crushed, forcing the dictator to seek asylum with the Vatican anuncio in Panama City, where he surrendered on January 3, 1990.

why-is-elliott-abrams-picking-on-panamas-noriega

The Americans Noreiga blames for his present dilemma include Assistant Secretary of State Elliott Abrams, Sen. Jesse Helms (R-N.C.), U.S. Ambassador to Panama Arthur Davis and his deputy, John Meisto. He claims that Abrams once asked Arturo Delvalle, the civilian figurehead president of Panama: "Why is Noriega defying us when the general {who ruled} Guatemala just packed his bags?"

Asked whether the United States is, in fact, trying to destabilize Noriega's regime, Abrams says this: "Panama should not be run by a general. It should be run by an elected civilian government. . . . The {U.S.} policy is to promote democracy."

Abrams dusted off the Panama playbook. Maduro and officials have been indicted and a naval blockade mounted. Not long now until US makes its move on Venezuela's oil.
Saudi's being told by Trump and congress to cut production. I doubt the Saudi's will own their oil patch much longer.

US has been losing its wars because it has tried to act under the cover of making friends, nation building, democracy ect. Those days are gone and the US is no longer hindered by the fig leaf of nation building. Back to the good old days of 'no man, no problem' - 'putative expeditions' ect.
Trump admin may be counting on plenty of job opportunities for US oil workers in Venezuela and elsewhere or simply controlling enough oil that US can control prices.

Posted by: Peter AU1 | Apr 12 2020 1:27 utc | 45

From my post @45. Senators rather than congress pushing KSA to cut production.

www.reuters.com

The call was led by Senators Dan Sullivan and Kevin Cramer, who introduced legislation in March to remove U.S. troops, Patriot missiles and THAAD defense systems from Saudi Arabia unless it cut output.

There were 11 Republican senators on the nearly two-hour call, including Bill Cassidy, who introduced legislation last week to remove the U.S. troops in 30 days, a month faster than the previous legislation.
Saudi Arabia’s action to boost production during a pandemic was “inexcusable” and “won’t be forgotten,” said Cramer, of North Dakota.


Posted by: Peter AU1 | Apr 12 2020 1:41 utc | 46

Coronavirus killed the shale industry? Prove it. Did the shale industry have a PCR test (which couldn't have detected an infection), or did it have an anti-body test (which doesn't work)?
A coronavirus peak nears (ahead of time), the modelling is clearly wrong, and lockdown unjustified

Posted by: Diral | Apr 12 2020 1:43 utc | 47

bevin 12
But that is not how capitalism works. Acquisition of assets when they are least profitable is an essential part of monopoly acquisition. Large companies are known to buy small companies and liquidate them to kill competition. Control is of the essence. Why otherwise would Trump want Syria’s oil? “We have got the oil”

Posted by: SA | Apr 12 2020 2:09 utc | 48

krypton | Apr 12 2020 0:39 utc | 43

You commented: Before b or anyone thinks of shorting oil stocks here are some of the latest WTI oil futures contracts in $US/barrel:
Listing the price of a few months, and you left it there. Discussion centered on Oil speculators those thinking of shorting,
I pointed to real time oil fundamentals -speculative trading the markets: Puts (short) and if you guess higher prices a Call option.

As b noted, There is the hedging vehicle oil producers such as Mexico deploy to protect contracted oil prices fixed a year or two in advance i.e. 2018-2019. Also oil producers deploy Swaps, Costless Collars, and Put Options.

here is how it works:

Oil & Gas Hedging - Futures - the most common strategies used by oil and gas producers to hedge their exposure to crude oil, natural gas and NGL prices.


A futures contract gives the buyer of the contract, the right and obligation, to buy the underlying commodity at the price at which he buys the futures contract. On the other hand, a futures contract gives the seller of the contract, the right and obligation, to sell the underlying commodity at the price at which he sells the futures contract. However, in practice, very few commodity futures contracts actually result in delivery, most are utilized for hedging and are sold or bought back prior to expiration.

So how can an oil and gas producer utilize futures contracts to hedge their exposure to volatile oil and gas prices? As an example, let's assume that you are a crude oil producer who wants to hedge the price of your future crude oil production. For sake of simplicity, let's assume that you are looking to hedge (by "fixing" or "locking" in the price) your October crude oil production. To hedge this production with futures, you could sell (short) a November crude oil futures contract. [.]

More

Posted by: Likklemore | Apr 12 2020 2:25 utc | 49

@ Posted by: Yeah, Right | Apr 11 2020 23:43 utc | 35

If we were still in 2003, you would be right.

After 2008 and Syria (i.e. Russian entering the game), nobody's that scared of the American capacity of sculpting reality in the ME anymore.

Posted by: vk | Apr 12 2020 2:26 utc | 50

The shale industry has always been propped up by ephemeral investments and subsidies- in short another Ponzi scheme. It also happens to be a filthy, toxic industry that would never exist in a healthy economy. We should be celebrating that the shale industry is disappeared but not so fast...

The workers that are going to be left out in the cold should be re-trained in a healthy industry and paid in full while doing so. However they will not be which goes to the heart of what defines the depraved economic system of the United States.

...as US banks are preparing to seize those assets for pennies on the dollar and guess what with that toxic debt.

From a Reuters report earlier today:

"JPMorgan Chase, Wells Fargo, Bank of America and Citigroup are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said."

“We regularly look for opportunities to operate on behalf of other entities, that is no different in this market,” said EnerVest Operating’s chief executive, Alex Zazzi.

You getting it yet?

Put away your useless masks people and wake up.

Posted by: Allen | Apr 12 2020 2:38 utc | 51

I'm probably getting laid off in a couple weeks, still waiting for that 1200 check from donald, but not holding my breath. When is the last time trump told someone "yeah we just mailed the check, it should already be in the mail, keep looking!" LOL

Posted by: Bob burger | Apr 12 2020 2:45 utc | 52

There now saying that it might take up to 10 weeks for some people to get those 1200 checks from gov. 2 trillion in bailouts for corporate america, I wonder how long it took them to get there money. The CARE act is the most ridiculous legislation ever, that bernie, aoc everyone voted for it. They did it once in 2008 it worked so well why not again?

Posted by: Bob burger | Apr 12 2020 2:50 utc | 53

Booleanbach | Apr 11 2020 23:25 utc | 34:

People are tired of endless wars. Trump will not get re-elected if he starts a war before November.

Posted by: Ian2 | Apr 12 2020 2:58 utc | 54

Posted by: Bob burger | Apr 12 2020 2:45 utc | 51

"I'm probably getting laid off in a couple weeks, still waiting for that 1200 check from donald"

BTW how long that miserable $1200 gonna to last? After that what are you going to do?

Hey bro I am really sorrie. Hang on tight it's an't gonna to get any better. Let's face it, this is our government whether we voted for them, we got shaft!!

Blame it on China or WHO (World Health Org) MAGA!!

Posted by: JC | Apr 12 2020 3:29 utc | 55

"Trump had argued for a disengagement of the U.S. from the Middle East as the U.S. had achieved independence from foreign energy. With the shale oil industry on its death bed the U.S. will again have to import oil from the Middle East. While Trump's disengagement was never fully carried out the new situation may lead to change his strategy."

The US has no choice but war.

Only remaining questions are where and how big.

Posted by: jiri | Apr 12 2020 3:30 utc | 56

psychohistorian @ 41

That story is another in a long list of Epoch Times (Falun Gong megaphone) that ZH has been running full on. It's been taken over the re-direct right wing anger from the place it belongs (TPTB) toward China. The site is now largely unreadable.

Posted by: sad canuck | Apr 12 2020 3:31 utc | 57

Yeah, Right 35 "No need to invade and occupy. All the USA needs to do is to engineer a war with one or more of them so the USAF can bomb the refineries/pipelines/ports/whatever."

More likely to be control what they can and destroy the rest. Bolton I think said something along the lines of Venezuelan oil being good for the US economy.
The Trump admin will be wanting to see as much oil as possible belonging to US oil companies with revenues coming in for those companies and also revenue for US government in the way of taxes and royalties.

Posted by: Peter AU1 | Apr 12 2020 3:42 utc | 58

@12 bevin.. it is not only easterners that went to alberta.. it is westerners too and plenty of them from bc.. lets face it - anyone who wanted a job in the oil field went to fort mcmurray for a gig in the fracking biz... it ain't pretty, but it is much the same gig as what the frackers in the usa have been doing and all of them - canucks and americans in this biz are now hurting.. i don't agree with @19 bravenewworld, that this is just a temporary thing and it will swing back.. and i would like to emphasize with @ 55 jiri notes - all the talk of usa oil independence looks like diddley squat with the price where it is now.. so yeah - the usa could give the houthis a green light or pull some quick stunt on their own and blame iran - all of it leading to the same desired result - higher oil prices to save the frackers ass..

seems like the pandemic with the oil crunch is a part of the perfect storm for more surprises depending on how long this shutdown goes on for.. as it is, capitalism has taken a pretty good shot in the head here.. lets see how it rebounds and what it takes to do it..

Posted by: james | Apr 12 2020 3:51 utc | 59

The world as we have known it is slipping away and there is no leadership in any nation I am aware of that is capable of more than a vain effort to stop the slippage and struggle to return to a normal condition that is no longer possible. In other words, the leadership of the world is profoundly and stupidly conservative with no vision of a sustainable future. Donald Trump is an exemplar of this stupidity. But let's not scapegoat Donald Trump and forget that he merely represents the stupidity of the contemporary ruling elite.

The concept of "sustainable" is not understood by this ruling elite, this bloated oligarchic clan. What are their numbers? 6 million or so? A mere shadowy cabal ruling the teeming globe, desperately trying to restore their collapsing oil industry and their collapsing financial system. They try to make themselves whole by reimbursing themselves for their losses at their casinos called "stock markets".

Where are those leaders that can articulate a vision of a sustainable global future? We go from one disaster to the next. Now it is a pandemic, and not such an awful pandemic when compared to what it could be. Mortality rate not all that horrifying. This mild pandemic causes global capitalism to stutter and falter, and it's only a symptom, not a cause. We are blind to the causes. We declare war on the coronavirus and think of ourselves as heroes, when what we are is fools, fools by the billion.

We have no genuine leaders, we've only got bad managers. Chris Martenson makes this point and I thank him for holding up a light in the darkness. The leaders we need are now disguised as environmentalists. Bill McKibben, for example. If she weren't 86 years old, we'd be wise to put Jane Goodall in charge of the world.

If we can't change the paradigm quickly enough, welcome to hell friends & neighbors!

Posted by: jadan | Apr 12 2020 3:54 utc | 60

@ 45 peter au... the thing with panama is noriega came out of the school of the americas...he was fine as a cia asset until he wasn't... it aint the same with maduro, but i am sure the usa is quite capable of trying a similar stunt here.. they have tried to frame maduro the same way they framed noriega... a lot more is at play and i am not sure how russia and china would respond to this..

@51 / 52 bob berger.. i think it was karlof1 who shared the twitter link that goes like this.. it helps that you have a sense of humour..

Stimulus packages around the world:

UK: 80% of workers' salaries

Denmark: 75% of workers' salaries

S Korea: 70% of workers' salaries

Netherlands: 90% of workers' salaries

Canada: $2k per month

Australia: $1k per month

US: One time $1200 check that may take months to arrive...

Posted by: james | Apr 12 2020 3:57 utc | 61

@bevin 12

The industry that has bankrolled Canadian conservatism, in its most extreme forms, is now lined up with a begging bowl looking for the very welfare, governmental assistance, that it has been sneering at for generations.

Nothing new there. The big corporations and financial institutions that preach competition, “personal responsibility” and ending the welfare state are the first to line up at the big bad gubmint’s door with a begging in hand and a sorrowful look in their eyes when the economic system they champion goes tits up. Happens every time.

That is going to change. Eventually even the greedy bureaucratic fools running the NDP will wake up and see that times have changed-the neo-liberalism that they have espoused is no longer sustainable. New ideas will be required.

Agree that change is coming. Even the US will have to change its social Darwinist ways when 1/3rd of the working population can no longer pay rent. But the ruling class is not going to let neoliberalism die quietly.

They will try to leverage the coming clusterfuck into getting governments to give them even more free money, get rid of environmental and safety regulations and expand their ability to control the population via surveillance tech.

How governments handle this will depend on what the citizenry demands. People who think their elected representatives will suddenly act in their best interests and put the banks and corporations in their place will be disappointed.

Without public pressure governments will only do the bare minimum to keep the system from collapsing into chaos.

Posted by: Daniel | Apr 12 2020 4:04 utc | 62

@ 58 jadan.. are you familiar with wendall berry? see link for more if interested.

Posted by: james | Apr 12 2020 4:06 utc | 63

If Trump is contemplating war seriously he ought to take care he doesn't end up on multiple fronts. China appears to be testing the waters (the SC Sea to be precise).

Posted by: Patroklos | Apr 12 2020 4:08 utc | 64

There is a solution which would protect shale oil, keep it reasonably profitable and generate income for the amerikan government to slow down inflationary pressure from all the Q.E. free money.
The only question is whether any amerikan politician would have the balls to implement it, Trump may though he is too silly to comprehend, that the proven effective way to defend a domestic industry, rather than simply blackmail foreign nations into acquiescence is to place tariffs on the imported competition for at least as long as supply exceeds demand & prices stay low.

The huge amerikan energy corporates would still turn a quid selling the oil they plunder outta the ME & Africa to other nations, nations we already know are too gutless to stand up to amerika, on the grounds they don't want to offend an 'ally'.

The citizenry would barely notice since the drop in wholesale prices has caused only a marginal drop in retail energy prices.
The government would have money to splash around on whatever. Knowing amerika, most likely the military. That would keep the elites, with their snouts in the MIC trough, very happy indeed.
If the elites accept that tariffs can be good as they are a major beneficiary & if as others have opined, that re-industrialisation is likely to be a post-pandemic outcome, tariffs are going to be the way forward.
Protecting domestic investment and generating employment - that is exactly the type of economy the trumpet wants to see, especially given that amerika's crooked 'justice' system which extends into the machinations of trade agreement arbitrators will ensure any complaint lodged with the WTO or over the NAFTA agreement is virtually guaranteed to fail.
Are we about to witness amerika's final trade hoedown?

Posted by: A User | Apr 12 2020 4:08 utc | 65

About COVID-19 killing shale oil and the lack of PCR test.

While many Americans are financially insecure, a very large proportion of consumption is "optional", not necessary for survival. For example, how many pieces of apparel one needs? If you do not want to keep with trends, and are content to make laundry a bit more often, typically you can survive a year or two buying very little from that category. Eating out is another category one can do without, if it is more bothersome than not keeping with fashion. Is shopping fun -- or aimless driving around to relax? And so on. All those "optional" categories are clobbered. Vacations, if any, will be strolls to a nearby park (in masks). Once this is over, unemployment will be 10% or more, employed will have low confidence, the previous levels of consumption will be slow to return.

All of that implies less flying, less driving, less plastic wrapping etc.

After the crash of 2009, people were not hit so deeply as today. The problem with shale oil and several other types of oil production is that you loose when you stop. From what I understand, all types of wells that rely on injections of liquid can be either lost or expensive to restart. Some gunk will fill the underground pipes, like asphaltene.

That describes all of shale oil and in situ production from tar deposits. It also describes older oil fields that depend on water injection. This is how the price of oil can be temporarily negative. To add insult to the injury, removing oil wells from production costs too. Otherwise unproductive wells seep and pollute. That can be avoided by bankruptcy, passing the buck to the public that may learn to enjoy smelly seeps. Alberta had 80,000 oil wells that were not producing but not closing, and the plugging them would cost between 50,000 and 1,000,000 per well (in some funny currency that they use in New Trumpland). This explains why independents have an edge over the "majors" in exploiting small deposits -- once there is a time to close, they can strip the company from liquid asset and leave behind a carcass with big liabilties. Why anyone would borrow them any money is the sad story of the later stage of financial economy.

Posted by: Piotr Berman | Apr 12 2020 4:13 utc | 66

I am sure more than a few readers here are familiar with Dmitri Orlov and his writings on subjects of collapse. One of his underlying themes was that the collapse of capitalism/america was inevitable. He couldn't say when it would happen, or what the cause would be, but he very credibly laid out all the weaknesses that have built up in our very complex systems for decades, and how the entire system was dependent on all the other parts of the system.

I think his writings could be summed up as saying that one day one of those parts was going to fail, and that would cause other parts to fail, and then very quickly the entire system would collapse. He even said people would probably not recognize it immediately when it happened, but it would quickly make itself evident.

I think we arrived at that day. What made me take notice was around March 15th the IRS postponed tax filing due dates by 3 months. The tax man never takes a break, when he does take a break, you can bet something very serious is going on.

Too many of the necessary parts of this machine have been damaged beyond repair. This machine might ramble on for a few months, maybe even a year or two, on its own momentum before it finally stops running for good.

Our country is a service economy, we make almost nothing, cars, airplanes and guns are the only things that come immediately to mind. Doctors, accountants, food and beverage, entertainment, retail, etc., all types of services, and all of these things require disposable income. Not too many people are going to have that for the foreseeable future.

We are in a positive feedback loop here, and everything is going to come to a grinding halt very quickly. I think the current unemployment claims are about 20 million, those people are not going to be spending any money on anything unnecessary, which will lead to more layoffs, and more tightening of spending. Rinse and repeat.

All those laid of people just lost their health insurance also. Lots of health care and insurance industry people are about to lose their jobs, and health care. Rinse and repeat.

Food and beverage industry is gone, so is retail, next will be entertainment, then health and insurance. All those professional jobs, accountant and lawyers, their time is coming as well. The last shoe to drop will be the military, I think we are already seeing signs of that.

I would be very interested in what others might have to say concerning this.

Posted by: David F | Apr 12 2020 4:35 utc | 67


Pity americans stupidly beyond believe!
He should just pray to his god in heaven just as GW Bush did before......

"Pres. Trump says he will "surround myself with the greatest minds" to make decision on when to reopen country"

Posted by: JC | Apr 12 2020 4:39 utc | 68

A User 64

Trump has been talking about tariffs on oil. He has introduced tariffs on other imports so quite likely he will introduce tariffs on oil.

Posted by: Peter AU1 | Apr 12 2020 4:40 utc | 69

james 2 62; thanks for the list, kinda' says it all about the "exceptional" nation, and how it treats the working class of the country..
Wish MSM would put it on TV. Yeah, I know, never happen....

Posted by: ben | Apr 12 2020 5:52 utc | 70

That's james @ 62; Kudos...

Posted by: ben | Apr 12 2020 5:54 utc | 71

I recall a paper I read some ten years ago that stated that most refining capacity in the US is geared towards light sweet crude.

The paper, that was written before the shale revolution, also stated supply of light sweet had been declining precipitously for years and that the only sources still able to produce it in significant quantities are Basra (Iraq), Libya and Nigeria.

If that is the case, it would seem that heavy sour imports from Saudi, Kuwait or the Middle East in general (ex Iraq's Basra), are a political decision rather than a practical one because some of the largest heavy sour producers are on the US' door step.

With any luck therefore, oil demand from the Middle East should never recover.

Posted by: guidoamm | Apr 12 2020 6:36 utc | 72

B,

Mexico's hedge can be sold or exercised. Thus, if Mexico reduces output its loss per barrel of oil is "just" the spot price of each barrel. Therefore, it is likely that Mexico will come into line with the Opec+ deal to cut production.

Posted by: R | Apr 12 2020 6:44 utc | 73

re Peter AU1 | Apr 12 2020 4:40 utc | 69
Yeah he has off and on but thus far Trump's view of tariffs has been as a temporary means to force oil exporting nations to fall into line rather than as a permanent feature of a restructured amerikan economy.
to me putting a long term tariff on oil is the most rational way of dealing with the stupid over-investment in fracking. Maybe Mnuchin is in his ear about how amerika needs 'free trade' when nothing is further from the truth.
The world needs a return to protectionism, otherwise national economies will continue to be unsustainable & corporate financial engineers will continue to wreak havoc.
The problem for humanists with protection back will be fighting to make sure africa, parts of asia & south & central america aren't disadvantaged by way of the preferential terms the big boys at WTO used to give each other pre 'free trade'.

Posted by: A User | Apr 12 2020 6:55 utc | 74

Trailer Trash #6

Peak oil is back on the table

Ha, ha, ha, ha, that's a good one! Various con artists have been promoting that idea since the day after the first refinery opened. It used to be that Peak Oil! would drive prices to infinity. Now they are saying it will drive prices to zero, then to infinity, or some other crazy prediction? Too funny.

I'll drink to that TT. I recall that the biggest manufacturer on the planet has undertaken to go entirely electric car transport in ten years. That will put a dent in the 'peak oil' nonsense. Peak oil production perhaps but then that might have been in 2019 and there is no certainty that we will get back there now. Thankfully.

I drive electric hybrid and they leave the combustion drive train for dead. They do not hold good resale value after a few years from new and oldies are reasonable to purchase for those with small cash stash. Its my alternative to flying as I prefer to journey locally for recreation.

Posted by: uncle tungsten | Apr 12 2020 7:13 utc | 75

B,

I'm confused on one point. I read elsewhere that the United States cannot legally cut production because of some existing law that forbids it.

How could the United States then ever agree to production cuts?

Posted by: Paul Escobar | Apr 12 2020 7:17 utc | 76

that 1200 bucks won't last most people a month. then what?

Posted by: pretzelattack | Apr 12 2020 7:19 utc | 77

@sad canuck | Apr 11 2020 20:39 utc | 18

Utter BS. Your problem is that the renewable energy scam is going to burn to the ground with these low oil prives. I worked on north sea wind parks. I know its a scam. Renewables suck taxpayer money in order to feed lobbies and the self-righteous egos of people who should rather go back to tradional religion instead of worshipping nature at the expense of normal hardworking folks. Can't wait for the demise of the corrupt reneables hoax

Posted by: dickrd | Apr 12 2020 7:38 utc | 78

@karlof1 | Apr 11 2020 21:48 utc | 29

“I don't intend to rewrite some of the thousands of words I've devoted to the topic of oil over the past 20 years as they've clearly made little impact on the minds of most barflies, although some sentences just can't be avoided.“

If your logic is convoluted and polluted with ideology and religious mantra, you cannot convince the more sane on this board, no matter how many words you spew.

Posted by: dickrdttt | Apr 12 2020 8:00 utc | 79

dickrd #78

Renewables suck taxpayer money in order to feed lobbies and the self-righteous egos of people who should rather go back to tradional religion instead of worshipping nature at the expense of normal hardworking folks. Can't wait for the demise of the corrupt reneables hoax

Where to start? Here is some research for you to do.

The subsidies to the oil and coal and gas producers are well documented. There are plenty of historical pieces in the above reference to bring you up to speed on the sanity of renewables. Enjoy the research.

Posted by: uncle tungsten | Apr 12 2020 8:45 utc | 80

@ David F 67
As for US exports, the position "aircraft" has been strongly reduced, recently - well documented here on MoA - and the crown finishes it off.
The US has recently become an agrarian state, among the largest exports are soy beans, eg in 2019, there where plenty of headlines like "Trade war: China buys US soybeans after fresh round of tariff waivers" - sounds rather insulting for the exceptional country, once known to be the leading industrial nation in the world, the Chinese guy, "we were looking around, what you could offer us, luckily we found something useful, we could feed our porks with some soy ..."

Posted by: BG13 | Apr 12 2020 8:46 utc | 81

guidoamm @ 72

I am pretty sure that is a regional issue. Texas and California generally refine heavy crude and the Northeast light. Venezuela has heavier sour crude and the Texas refineries are set up to run that crude. This is why it was a big loss for them to lose that country. I am sure they are surprised they have hung on this long.

The shale oil boom caused many refineries to think about adding units to refine the lighter oil. The Bakersfield wells generally get shut in when prices sink this low and get restarted when it comes back. It is priced lower than WTI. They are now shut in.

The smaller companies are riding on the special privileges built into the business by the majors. They socialize their losses while claiming to be pure capitalists. They do not even think about the toxic legacy they are leaving behind. It is a war mentality. "We were just following orders."

Posted by: dltravers | Apr 12 2020 9:14 utc | 82

If not because this is an election year, the iranian refineries, pipelines and ports would heve been bombed, and the Straight of Hormuz closed few weeks ago, ending effectively the supply of 30% or the global oil production and sending the oil price to 100$ and the shale saved during some years (you do not re-build a refinery in some months, specilluy now).

Unfortunatelly for the Deep State & Trump some thousands body bags arriving from the ME is not the best strategy to win an election, but we'll see after November if this happens or not

Posted by: DFC | Apr 12 2020 10:07 utc | 83

Several points.
It is not just the shale market, it is all oil markets that close over next 40 years. Pump now or leave it in the ground.

Oil prices will not "go back to $20" a barrel because for most producers they were never there. Most producers sell oil derivatives ahead of production, so the relevant prices for decision making are those for 6-12 months forward.

Recent rallies in spot oil have all been 90% about delivery considerations and only 10% about any Opex++ deal

As I write US oil is $23.19 for May delivery. $33.27 for August delivery. and $35.95 for May 2021 delivery
US forward oil prices based on futures:
https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html
Click on the chart symbol besides say the August numbers to see how an oil producer sees recent price movements

Brent forward oil prices based on futures:
https://www.cmegroup.com/trading/energy/crude-oil/brent-crude-oil.html


Spot / immediate delivery oil has been very volatile recently. Whereas for oil buyers and producers there was a very sharp one-off fall in early March followed by a very stable level of oil of about 30-35 in US markets and 33-38 for Brent.

The Spot market has been very volatile for very different reasons. In theory I could hire a tanker, buy oil for May at $23, and then sell it in August at $33 for a $10 profit. As you may have guessed, the problem is that there are simply no storage facilities available.

Having said all this, there are very significant transport costs for US oil. They are not producing from an oil rig where a tanker can simply drop by. Or with fixed high volume pipeline to a Saudi port. Shale is spread out over wide areas and a pipeline network is a big cost.

Mexico did not agree to a cut. The country has hedged nearly all its oil exports:

Mexico, the world’s 12th-largest producer of oil, has hedged much of its 2020 output — that is, agreed ahead of time to a set price, reportedly about $49 a barrel. That practically eradicates any incentive Mexico might have to go along with production cuts this year.


I think you have misunderstood Mexico's options here. I daresay they have not been too open in press comments. Generally hedges can be closed out for a profit without actually making delivery. Certainly some 10 or 20% could be, more than enough to make a significant cut in production if Mexico chose.


@ 11 psychohistorian

I would think that Saudi oil is easier to control than Venezuela.

Sanctions have been very effective, Venezuela produces almost nothing and is unable to develop new fields, despite claiming to have bigger reserves than Saudi.


Posted by: Michael Droy | Apr 12 2020 10:28 utc | 84

Virgile @42: "With Andrew Cuomo possibly replacing Biden as the democratic candidate, Trump's chances to be re-elected are compromised."

Trump would have a field day with that. "Why do you fake democracy democrats even bother with your primary elections?" Given the divergence of Democrat election results from the exit polling, Trump would be right about that, and the truth would give his jabs power.

Democrat strategists really need to stop thinking that they are so much smarter than the electorate. It isn't so much that the electorate is collectively very intelligent, but rather that the Dem strategists are shockingly stupid. Their "clever schemes" are fooling some, but nowhere near enough to win elections.

"Anyway who wants to be the president of a country possibly in economical depression?"

Hmm... tough question. Maybe a real patriot? Someone who is trying to help the country empire rather than just ride the gravy train?

I'm not saying Trump is the great leader that America needs right now. Far from it, but he's not going to have any trouble surfing that narrative through the election. Cuomo, on the other hand? Trump will have no difficulty tarring him with the massive covid failure in New York and making Cuomo own it. I can already see "the Cuomo virus" getting "accidentally" injected into the public's lexicon by tweet.

Once again, it is clear that the oligarchy has calmed down and gotten comfortable with Trump. At the end of the day that's what generally controls the outcome of the elections in the US, barring bizarre upsets like what happened in 2016. And no, Cuomo is not "election insurgency" material. If the oligarchy wants Trump to be President then Trump will be President. The only candidates this year that could have formed the nucleus of an electoral insurgency have chosen not to do so.

Posted by: William Gruff | Apr 12 2020 11:14 utc | 85

Trump could support the other side and cause more Houthi attacks on SA oil infrastructure, support anti-government protests, etc. Regime change is easy, if only Trumps zionist friends would support that.

Posted by: Joost | Apr 11 2020 20:45 utc | 20

Ziofascist Trump will never do that. Zionists will always value global power through geopolitical maneuvering over anything.

China is the biggest threat right now to that power, because, after Trump's tariff war had China on the defensive, China is back in the driver's seat and has leverage again to operate offensively.

China was the most effective at managing the pandemic and will be the winner on all fronts in the post-pandemic economy. So, it is starting to replace Iran as Public Enemy No. 1. Trump kept saying he likes Xi at the same time he was sticking it to China's economy. Trump has a lot of political capital riding on his ability to control and contain the dragon. Look for his like towards Xi to sour.

China has an opportunity right now to move up as a world power. This is a pivotal moment for world order. Western economies are debt-ridden and this weakness will play a big role in their ability to steer clear of financial collapse. China doesn't have the oil problem or the debt problem. You know wiley Xi is going to play these cards against the West.

Then there is nuclear-armed North Korea patiently waiting...tick-tock.

Let's see how Trump get's out of this. He's gonna turn to Kissinger's expertise, but even that old fart might not be able to help him.

Interesting times for some; hard times for others. There is war and opportunity on the horizon. I wonder which door will open? Knowing the greed of Ziofascist Trump and his Zionist financiers; they'll choose the wrong door.

Posted by: Circe | Apr 12 2020 12:02 utc | 86

I love how "war with Iran" has become a cottage industry. How easily Americans see war as a solution to everything. Just look above for the predictions. It has seeped deeply into their psyche. When you have a hammer all problems look like a nail.
To all those: no, every once in a while, US takes a "shit-hole" country and troughs it up against the wall. Iran is not that country.
Let see the new ways to predict:
I can't find toilet paper to wipe my butt --> war with Iran
My industries are failing --> war with Iran
Covid --> war with Iran
No more fracking --> war with Iran
Oil too low --> war with Iran.
Basta.

Posted by: Sakineh Bagoom | Apr 12 2020 12:04 utc | 87

Re: Peak Oil. The very fact that America find itself in this bind is proof that peak oil has passed. That doesn't mean there is no oil, just that it is more expensive to get at.

Posted by: William Gruff | Apr 12 2020 12:04 utc | 88

@dickrd | Apr 12 2020 7:38 utc | 78

Utter BS. Your problem is that the renewable energy scam is going to burn to the ground with these low oil prives. I worked on north sea wind parks. I know its a scam. Renewables suck taxpayer money in order to feed lobbies and the self-righteous egos of people who should rather go back to tradional religion instead of worshipping nature at the expense of normal hardworking folks. Can't wait for the demise of the corrupt reneables hoax

Thank you, a rare voice of reason. North Sea wind parks are a total scam sucking taxpayer money indeed. I agree with all you say.

Posted by: Norwegian | Apr 12 2020 12:23 utc | 89

*throws not troughs

Posted by: Sakineh Bagoom | Apr 12 2020 12:29 utc | 90

Likklemore #49

Thank you for your explanation on how hedging/futures works. I can see how post #16 was inaccurate or at best a huge over-simplification.

What still find confusing is why agencies like CME and EIA are still showing future prices of oil to the end of 2020 and beyond at substantially over $20.

See Michael Droy #84

Posted by: krypton | Apr 12 2020 12:39 utc | 91

@William Gruff | Apr 12 2020 12:04 utc | 88

Re: Peak Oil. The very fact that America find itself in this bind is proof that peak oil has passed. That doesn't mean there is no oil, just that it is more expensive to get at.

The problem is that oil is too cheap, not that it is too expensive.
There is plenty of accessible oil to be found, Iran recently found a large field for example.
Iran discovers new oil field with over 50 billion barrels

This may not be to the liking of the empire, but the oil is there.

Posted by: Norwegian | Apr 12 2020 13:07 utc | 92

I read today of the massive amounts of food that is being literally dumped, buried and smashed in the us today. Onions, beans, milk, and eggs being discarded by the ton.

This answered my question from a few days ago where I wondered why the grocery store was less than fully stocked. This food is being discarded because the packaging is set up for restaurants and schools. Think single serve milk cartons, eggs sold by the gross, and 50lb bags of onions.

Evidently, it is more profitable, or less of a loss, to simply discard this food than it would be to re-tool the machinery. How hard and expensive can it be to go from individual milk cartons, to gallon milk cartons? I am more than a little surprised that these food packaging places are geared to such a single purpose. I would have thought that a food packaging place would be capable of packaging milk in multiple sized containers, or eggs in multiple sized cartons.

About the only item that made some sense was onions. The farmer said "people don't eat onion rings at home." Understandable, all the others are disgusting side effects of capitalism. So many people in this country going hungry tonight amid so much waste. What a wonderful place america is!

ps I am surprised that no one had any comment on my post at 67. Does no one here find that to be an interesting topic?

Posted by: David F | Apr 12 2020 13:26 utc | 93

Sakineh Bagoom--
Right on, I was noticing just how many commenters jumped for the war button as a solution.
Very ingrained and also the self assurance that they would not receive any serious blowback. Whew, the arrogance.

Posted by: arby | Apr 12 2020 13:41 utc | 94

Anyone want to take a stab at answering the following:

Why are some respected alt-media embracing a police state?

https://off-guardian.org/2020/04/12/why-are-some-alt-media-embracing-a-permanent-police-state/#comments

Posted by: Allen | Apr 12 2020 13:41 utc | 95

It would be interesting to see what the CME oil futures were predicting the price to be in March 2020 from about 6 months earlier. I'll bet a thousand dollars to a donut that $20 was nowhere to be seen.

Posted by: arby | Apr 12 2020 13:44 utc | 96

@Allen | Apr 12 2020 13:41 utc | 95

Why are some respected alt-media embracing a police state?

I don't have any answer, but indeed it is a relevant question!

Posted by: Norwegian | Apr 12 2020 13:57 utc | 97

Same as why Democracy Now fell into the Syria trap.
http://www.karlremarks.com/2013/04/the-eu-is-running-jihadi-exchange.html?m=1
Just a quick remembering...

Posted by: Mina | Apr 12 2020 14:07 utc | 98

Posted by: Allen | Apr 12 2020 13:41 utc | 95

"Why are some respected alt-media embracing a police state?"

Various parts of once-respected alt-media have been embracing all sorts of bullshit and propaganda for many years now, going back to at least the reign of Bush the Lesser. The list is long and growing, no need to focus on this one case. I mean they haven't even agreed on a settled narrative for The Corona yet. Corruption happens.

There is no Easter Bunny either.

Posted by: Bemildred | Apr 12 2020 14:15 utc | 99

Mina @98-- Karl is being sarcastic in that article. Democracy Now became for real on Syria.
I stopped paying attention to Democracy Now when that sudden switch happened. I found it interesting that Democracy Now suddenly had found a donor who would double or triple any donations they could raise that happened to start right around that time.

Posted by: arby | Apr 12 2020 14:27 utc | 100

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