So what does this mean to us everyday people? Every article I read says the same... horrible... first time in history.... never seen anything like it. Very nice Captain Obvious! But how does this affect every day life... until things get back to the "near normal". I know, I hate that term too! Seeking some insight from the smart ones on this page.
NEW YORK (AP) — Oil prices plunged below zero on Monday, the latest never-before-seen number to come out of the economic coma caused by the coronavirus pandemic. A barrel of benchmark U.S. oil for May delivery fell to negative $37.60 per barrel as traders sought to avoid owning crude oil with nowhere to store it. Prices for other oil contracts also plummeted as storage facilities for crude approach their limits. The S&P 500 fell 1.8%, giving up some of the big gains from its first back-to-back weekly gain since February.
The industry has always been cyclical, boom and bust. As far as I can tell as to what is different this time around: credit is hard to come by (impossible for some) and the average onshore well costs $5 to $10M to drill and complete. This will be a painful shake out and retrenchment which will fall heavily on the smaller operating companies and those deeply in debt compared to free cash flow regardless of size.
It's just very disturbing... and hopefully we'll look back on this terrible day with sad fondness... if that's possible.
The busts are always painful but lead to a healthier industry as the strong companies benefit and the vulnerable companies cease to exist. The industry has been sick now for about eight years. The natural gas segment since the supply glut hit in the early 2010s. The oil segment since the same technical innovations were applied to oil in the mid 2010s. Unfortunately for consumers, we are locked down and mostly unable to benefit from cheap fuel prices. That will change but slowly over the remainder of the year. Heading back to normal may begin for some in the next 30 to 60 days. Getting to normal may very well take until some time next year. But then the question becomes what does that new normal look like exactly.
Skip, this bust comes when pre Covid household debt was 16 trillion, while corporate debt was greater than that. This bust comes as the political culture is very green oriented and the government is heavily indebted and ready to drop subsidies and regulatory ease. Demand will not roar back, and by the time it does, our societal behavior and technology will erase the old oil biz pattern. You get the feeling we are in a different world and not going back.
Cheap money has fueled a lot of business growth over the last decade but none more so than the O&G industry shift to unconventional reservoir E&P. Yes, there are a number of factors at work when imagining what the future will look like post COVID-19. The only safe bet IMO is that the new normal will look nothing like the old.
I agree. Around there, guess the oil patch will go back to being Dogpatch.
My hope is that laid off oil field and service industry workers will be working to build and then operate new factories here in the US to make ... you name it, 25% of the stuff that we now buy from China and India. We must learn this hard lesson - the lowest price goods aren’t always the wise choice.
Tell that to the C Suites of corporate America. I can believe they are looking to leave China. I doubt that they are looking to return to the US. They are looking for the cheapest non-China labor market as per their usual.
Once more, you are just stating the facts.....just like Sgt Friday would ask for. There is no way in hell they will come here, unless they are strong armed. Of course, that would not be “freedom”in their eyes, as they are free to make a killing. They also feel free to get a bail out, if needed. But hey, that is the way it is.
I think a significant portion of rational, middle-of-the-road Americans are watching this "bailout" quite closely and will remember how it was structured and applied come election day. Congress will leave out the less powerful at their own risk.
Yes, because before Covid-19 there were over 16 trillion of household debt and over 40 per cent of the population making less than 18000 a year. Now, throw over 22 million unemployed with uncertain futures and “rational, middle-of-road” will have a new meaning with keener observation.