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Page added on January 2, 2015
The Oil Plunge: The Facts & Why We Should Care
According to The Wall Street Journal four of the five worst stocks in 2014 were oil/energy related and the fifth was Avon. Gas prices were cheaper and women were opting for more expensive cosmetics? I’m guessing that’s probably not the case.
- TRANSOCEAN LTD. – DOWN 62%
- DENBURY RESOURCES INC. – DOWN 50%
- NOBLE CORP. – DOWN 47%
- ENSCO PLC – DOWN 46%
- AVON PRODUCTS INC. – DOWN 44%
Gas prices at the pumps hit a four year all time low, which is great for us; but, does this savings come at too high of an eventual cost or are we just really looking for problems where there aren’t any? There is no simple answer if there is one at all. Economists, environmentalists, scientists and politicians all have theories (often conflicting) but do have one slick concept in common- peak oil.
The concept that since oil is non-renewable, there will be a point in the future at which the rate of extraction will hit a peak and thereafter will decline. The model and term, peak oil was first introduced by M. King Hubbert in 1965. This term should not be interchanged with oil depletion, as that is the period where oil reserves become depleted, whereas peak oil describes the point at which we will hit maximum production, the peak of oil production.
Mike “Mish” Shedlock gives a nice breakdown on his take in What’s Behind the Plunge in Oil? Winners and Losers? Boon to Spending or Recessionary? Shedlock uses Occam’s Razor, a principle that suggests the simplest workable explanation is likely to be the best one which and in turn dispels of what he considers conspiracy theories. Shedlock’s breif overview of his theories explaining the oil plunge:
Slowing global economy, especially China and Europe
US production expansion
OPEC pumping above quotas – they all cheat
Iran embargo failing
Increased fuel economy
Attitudes of millennials towards cars and driving
According to Shedlock:
The US saw an increase in production not because there is abundant supply, but rather because prices got high enough to make diminishing supply profitable to exploit. After all, that’s what peak oil is about.
And with this plunge in oil, new development has come to a halt. Many of these drillers are not profitable at these prices and huge numbers of bankruptcies will result.
Shedlock’s theory that many drillers are not profitable is consistent with The Wall Street Journal’s article in that four of the five worst stocks in 2014 were in fact oil related drilling companies.
Shedlock references the Financial Times infographic of winners in losers in the oil game.
A Motley Fool article 2 Ways Plunging Oil Prices Could Threaten the U.S. Economy confirms the same two problems cited in Shedlock’s article the increase of job loss and junk bonds are tied to an oil plunge. Fact based evidence over time is the best indicator of the future and while we’re enjoying the prices at the pump we want to deter another repeat of Michael Milken’s junk bonds from the late 1980’s.
16 Comments on "The Oil Plunge: The Facts & Why We Should Care"
Apneaman on Fri, 2nd Jan 2015 10:01 am
Thanks for those facts, but I don’t fucking care because industrial carbon man is a dead man walking.
Perk Earl on Fri, 2nd Jan 2015 10:32 am
I wanted to post this somewhere because it means 2014’s oil price descent marks an important major event in its history.
Major oil dates & assoc. events:
1859 oil discovered in Pennsylvania
1960’s peak discovery
2005 initiates conventional plateau & ascent of non-conventional
2014 45% oil price descent initiates non-conventional descent
This indicates the plateau began some 40 years after peak discovery (Hoorah for Hubbert), and If non-conventional cannot muster another ascent in the future then the ascent of non-conventional lasted only 9 years.
The next future event would be the initiation of the descent of conventional oil.
Apneaman on Fri, 2nd Jan 2015 10:37 am
It starts on the periphery and works towards the center.
All over the world, the challenge to the old order is growing
The powers that be will fight back against attempts to change the status quo, economically or globally
http://www.theguardian.com/commentisfree/2015/jan/01/challenge-to-old-order-growing?CMP=share_btn_fb
James Tipper on Fri, 2nd Jan 2015 10:42 am
Same sh*t, different day, stop with all the lies.
“Slowing Chinese growth” only to ignorant Western economists could a country slowing from 8% GDP growth to like 7.5% GDP growth be considered “slowing”. That’s barely anything, the U.S. hasn’t seen that sort of growth in decades, what are they talking about?
“Increased fuel economy”, I’ll take Jevons paradox for 100.
“Iran embargo failing”, pshh, there’s plenty of buyers of Iran’s oil, they don’t need the West.
“OPEC Producing above quotes”, Even though they decrease production recently.
“US production expansion”- Fracking will prove a bust in a couple of years.
J-Gav on Fri, 2nd Jan 2015 1:14 pm
“We want to deter another repeat of Michael Milken’s junk bonds from the 1980s.”
‘Fraid it’s a little late for that me bucko! There’s so much shite swirling around out there today in the form of derivatives trading backed by … oh, just what exactly? Essentially by your 401(Ks), your bank account and any other investments in ‘the system’ which you may have.
J-Gav on Fri, 2nd Jan 2015 1:55 pm
… and even all that – plus increased taxes and so on, will only cover a small percentage of the highly-leveraged, speculative “free-market operations” which are ongoing and undoing whatever may yet exist of a semblance of a ‘real economy,’ somewhere out there in La-La Land … Try to count a quadrillion on your fingers, you’ll get the idea.
Perk Earl on Fri, 2nd Jan 2015 4:23 pm
http://www.theautomaticearth.com/the-meaning-of-your-life-is-other-people/
I liked this part of an article from the link above, written by Raul Ilargi.
“Our economic system reflects, and appeals to, the part of our brain that tells us to outdo others, not cooperate with them.
Of course this is a complex issue, if only because our brains just happen to be made up of different parts. Still, if we are ever to enable the newest part of it, that which makes us human, and sets us apart from our non-human ancestors, from the simplest amoeba to far more advanced primates, to take control, if we are ever to achieve that, we will first have to recognize things for what they are. And then act on that.
Endless and forever competition from our earliest childhood days all the way to our graves clearly doesn’t seem the way to go. Look around you. It makes us destructive beings. It makes us unkind to each other, and distant from one another. Those are the very things that tear apart the social fabric our very biology says we need. If we don’t make a strong conscious effort to allow our ‘human brain’ to control our ‘animal brain’, we have no chance, we will be lost. Today, what we do is use our human intelligence to amplify the destructive properties of our animal brain.”
It makes for interesting conjecture as to what part of the brain we really should be setting the rules of society for the best interaction of people and long term health of the planet. We need to start thinking in higher terms or at least consider them post collapse.
Northwest Resident on Fri, 2nd Jan 2015 5:01 pm
Perk — Glad to see I’m not the only one around here who gets a lot of meaning and good info from theautomaticearth website!
You know, humans spent probably 99.999 percent of their time on planet earth, and millions if not billions of years evolving before that, with “the tribe” as the realm within which all human traits developed.
Within the tribe, sharing, caring for others, collective collaboration, sense of identity, loyalty and so many other human traits central to who we are developed. No doubt, there was competition between members of the same tribe, but that competition was muted and controlled by the overriding need to maintain balance and normalcy within the tribe.
But, when it came to tribe versus tribe, THAT is when the truly vicious competitive impulses that had developed in humans for eons was truly unleashed. When competing against other tribes, the strongest and most ferocious competitors were rewarded for their behavior.
Now, here we are in modern society. There are no tribes any longer. Each person is a virtual tribe unto himself, in competition with every other person (virtual tribe). Maybe within a corporation or in other environments people pull together to collectively direct their competition outward, for a while. But still, there is plenty of jockeying and competing even within corporations — pure unbridled competition, each person trying to out-do the other because that is what our survival development through history evolved us to do against non-members of our tribe which, when there are no tribes, is basically everybody. That IS our behavioral instinct.
Humans will do much better I think when we return to our tribal roots.
Just a little philosophical thought on the situation that Raul Ilargi and you are talking about, for what it is worth.
Makati1 on Fri, 2nd Jan 2015 7:24 pm
NWR, and what part of the world will have the easiest path to those tribal roots? I would venture to guess, the 3rd world. The 1st world has fragmented and homogenized to the extent that families do not even live within walking distance of each other. May not even talk except by internet or text.
This is true in the 3rd world, but to a much smaller percentage. Here in the Ps, millions come into Manila to work, but holidays (many) and weekends, they go home to family in the countryside. This Christmas/New Year’s holiday has seen the city almost deserted. Banks and most stores close for the 4 day weekends. It is as quiet as a mega city can get.
Perk Earl on Fri, 2nd Jan 2015 7:35 pm
Yeah, you make some good points there, NR. A single tribe that has goals with everybody working together is one thing, but like you say once it’s us vs. them, then things change quickly and now on an individual basis.
I worked in a real estate office selling/leasing commercial property in SF out of a small company with some guys I thought were my long time friends. Oh my, that was a wake up call. Never seen greed like that before or since.
My Father and stepmother use to get us four boys together and ask us pointed questions to determine which one was doing best. Then after inferring a hierarchy, they would tell each one of us what we should be doing to up our game. When I was an agent in SF, they said I should become a broker. Their routine became a joke amongst us, but little did I know that was the wave of the future. Charge harder all the time against even your own brothers! What a laugh.
It’s like any restraint has been caste aside to drive as hard and as fast as possible to get as much as possible in competition with everybody else. What could go wrong as we chew through this planet like a beaver through balsawood.
“Humans will do much better I think when we return to our tribal roots.”
And that appears to be where we are headed – localization. Since reading JHK’s, ‘The long Emergency’ some time ago, I have wondered how many people sitting around in big groups in the evenings (post collapse) would remark on how much happier they are vs. the life they lived before, even though they don’t have all the material stuff they once had, because of a sense of greater connection to other people. It might surprise a lot of people that think that outcome would be an awful one.
It’s looking like we won’t have to wait very long to find out. S’s hitting the fan somewhere every day now. Now Kurkistan’s currency just lost 17% in one day’s currency exchange! There’s an article about it over at Zero Hedge. In another story the national debt shot up 100 billion in one day as we shifted into 2015!
Perk Earl on Fri, 2nd Jan 2015 7:44 pm
Here’s those two links:
http://www.zerohedge.com/news/2015-01-02/us-debt-soars-100-billion-last-day-2014-hits-record-1814-trillion
http://www.zerohedge.com/news/2015-01-02/turkmenistan-devalues-currency-18-armstrong-warns-economic-collapse-global-scale
Oh, it’s Turkmenistan instead of Kurkistan (wherever that is? lol!)
GregT on Fri, 2nd Jan 2015 7:51 pm
“Our economic system reflects, and appeals to, the part of our brain that tells us to outdo others, not cooperate with them.”
It also appeals to the part of the brain that tells us that we are above nature, and that we have no need to cooperate with IT. Some still believe that we will colonize other planets, but really what would the point be? If we can’t get our shit together enough to take care of the one we already have.
Capitalism has turned out to be a catastrophic failure. Not only on a societal level, but a planetary one. We need to return to some form of socialism, or communism, where we take care of each other, and the only planet that we will ever have to live on. Unfortunately we have been subjected to so much propaganda by our ‘masters’, that the chances of that ever happening are slim to none, at least for us in the West.
Capitalism good, socialism evil.
Apneaman on Fri, 2nd Jan 2015 7:53 pm
I’m old enough to remember how things changed after Sunday shopping was passed. The Fundies like to bitch and moan about secularism, but it was all them church going chamber of commerce Christians who pushed/paid for it. Seemed like many folks, church going or otherwise, spent more time together on Sundays back then. That used to be the grandparents visiting day. Capitalism is the real religion of the west.
Northwest Resident on Fri, 2nd Jan 2015 8:48 pm
Makati1 — I think that the tribal instinct is genetically ingrained into each human. It is an instinct that we ignore to a large extent in the Western world where the much glorified “man who stands alone” is the perverted cultural “norm” that is expected of us. True, in 3rd world countries Philippines included, a return to tribe will be much easier because obviously those third world countries have digressed less far from their tribal roots. But in America and elsewhere, the basic instinct to pull together into tight-knit groups of people where survival and security depends on those you live and work with, will naturally occur under the right conditions. We all know those “right conditions” are in the oven baking right now, and when “it” will be “done” is just a matter of time. But when the time comes, the genetic longing for community and sense of identity and need for common security will work its magic wherever there are enough people left to make it happen. Just pure stream of thought…
Makati1 on Sat, 3rd Jan 2015 6:14 am
NWR, I would disagree with that part about American’s “pulling together” in a crunch. I would bet $100 that most have not even met their neighbors three houses down or in the apartment down the hall, beyond a “Hello”, or “Get your dog out of my yard!” Families are mostly scattered across the 50 states and the world. Mine live in five states and me here in the Ps. When the SHTF, traveling any distance will be over for most of America, me included.
As for co-workers, I would not have trusted most of those ladder climbers farther than I could throw my 65′ Chevy. Office politics is warfare of a Predator Capitalist kind. Why do you think they will suddenly be willing to share and work as a team?
I read a lot of these “feel good”… “humanity will …” articles, but I don’t see any evidence that they are any more accurate than the unemployment numbers or the value of Google stock. All dreams…
Guess we will have to wait and see who is correct.
Kenz300 on Sat, 3rd Jan 2015 9:07 am
High cost producers like shale, tar sands and deep water are pulling back…… you can not sell at a loss for long and stay in business.
The sooner we transition away from fossil fuels the better.
Why is the Keystone pipeline needed?