{"id":15684,"date":"2015-12-26T09:04:19","date_gmt":"2015-12-26T14:04:19","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15684"},"modified":"2015-12-26T09:04:19","modified_gmt":"2015-12-26T14:04:19","slug":"lower-oil-prices-are-shaking-the-world","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15684","title":{"rendered":"Lower Oil Prices Are Shaking the World"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2015\/12\/25\/lower-oil-prices-are-shaking-the-world\/\" target=\"_blank\">Lower Oil Prices Are Shaking the World<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>The long-term effects will echo for a decade or more.<\/strong><\/p>\n<p>Oil prices fell by over half from June 2014 to January 2015 (Brent:\u00a0 $110 to $50), then another one-third since (to $35). Natural gas and coal prices\u00a0<a href=\"http:\/\/wolfstreet.com\/2015\/12\/18\/carnage-in-us-natural-gas-as-price-falls-off-the-chart\/\" target=\"_blank\"><u>have also plunged<\/u><\/a>, partially due to the same forces but also from substitution.<\/p>\n<p>These are the results from a modest slowing of demand growth and \u2014 more importantly \u2014 the decision of the Saudi Princes to wage the first\u00a0<a href=\"http:\/\/wolfstreet.com\/2015\/12\/08\/financial-war-over-oil-reshapes-world-will-end-with-much-higher-prices\/\" target=\"_blank\"><u>financial war<\/u><\/a>against next-gen oil producers, those that tap oil sands, shale fields, and deep ocean deposits.<\/p>\n<p>This is how\u00a0<a href=\"http:\/\/www.bloombergview.com\/articles\/2015-08-24\/why-oil-producing-countries-keep-on-pumping\" target=\"_blank\"><u>Bloomberg<\/u><\/a>\u00a0put it:<\/p>\n<blockquote><p>Saudi Arabia won\u2019t be satisfied with another temporary rebound in oil prices, such as the one that occurred last spring: Their U.S. competitors would just increase output again. They must inflict permanent damage by demonstrating to investors that with shale, they can\u2019t bet on any kind of predictable return.<\/p><\/blockquote>\n<p>This will not end quickly; the list of casualties will be long. Goldman found\u00a0<a href=\"http:\/\/www.bloomberg.com\/news\/articles\/2014-12-18\/bankers-see-1-trillion-of-investments-stranded-in-the-oil-fields\" target=\"_blank\"><u>$1 trillion<\/u><\/a>\u00a0in \u201cstranded\u201d or \u201czombie\u201d investments in oil fields \u2014 a year ago at $70 oil. At $35 oil the total would be much larger.<\/p>\n<p>The end will come with the bankruptcy or restructuring of many next-gen oil corporations, followed by a newly empowered (and perhaps expanded) OPEC cutting production to bring spare capacity back to average (3 or 4 million b\/day) \u2014 providing a valuable production cushion for the world economy\u2019s supply of this vital input. The long-term effects will echo for a decade or more: a higher cost of capital for and depressed risk-taking in the petroleum and coal industries.<\/p>\n<p>The\u00a0<a href=\"http:\/\/wolfstreet.com\/2015\/12\/02\/distress-in-corporate-debt-spikes-to-september-2009-level\/\" target=\"_blank\"><u>bond market has already begun to price in<\/u><\/a>\u00a0the coming bankruptcies of oil and natural gas Exploration and Production companies. But the geopolitical implications remain largely unexplored.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Lower Oil Prices Are Shaking the World The long-term effects will echo for a decade or more. Oil prices fell by over half from June 2014 to January 2015 (Brent:\u00a0 $110 to $50), then another one-third since (to $35). Natural gas and coal prices\u00a0have also plunged, partially due to the same forces but also from [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[588,1775,594,595,596,600,701,1358,4255],"class_list":["post-15684","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-oil","tag-oil-price-collapse","tag-oil-prices","tag-oil-production","tag-oil-supply","tag-opec","tag-saudi-arabia","tag-us-shale","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15684","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15684"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15684\/revisions"}],"predecessor-version":[{"id":15685,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15684\/revisions\/15685"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}