Saturday, December 13, 2014

Oil's Slippery Slide

So hey, who else thought that the $60 was going to be a line in the sand?


Woops! Guess not.

I have written about oil last week, so it's not really a surprise to me that oil is slipping.

Anyway, I found an even better picture that shows oil breakeven costs.


Yikes.

Whoever is going around spreading the narrative that, "lower oil prices is being masterminded by the US. they are manipulating the saudis to drop prices so that russia gets hurt" is just full of s***. Lower oil prices hurts the energy sector of the US market like shit.

Please don't get me wrong. My commentary isn't meant to be "Yay, lower oil prices! I told you so! Suckers with all your O&G counters!". I am long term bullish oil. At these prices, O&G counters look really attractive to me! Lower oil isn't the outcome, lower oil is the problem.

I think that the massacre of this industry is going to have massive effects on the broader economy. Talking heads on teevee like to say how isolated the oil sector is, but I don't think they are right. When you hear the word shale, what word always comes along with it? If you said "booming", you're right.

The shale industry has grown massively and rapidly, employing tons of people and borrowing a lot to fund this expansion. If this industry goes kaput, so goes the rest of the economy as unemployment spikes, along with all the other goodies that come along with it.

Lower oil prices isn't the REAL problem. The REAL problem would be if these low prices persist for a low period of time, leaving all the commercial hedges out swimming with no protection anymore. And that is going to be a big problem. Not oil spill, but blood spill. *ba-dum-tissss* Oh come on, give me a comedy award already!

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