ROCKMAN wrote:ralfy - "what happens if the "lean years" become a permanent fixture?". You mean like the nearly 3 decades (1940's to 1970's) when the inflation adjusted price of oil averaged about half the current price? Or the 2 decades (1986 to 2006) when the average price of oil was significantly less then the current price?
Perhaps it depends upon how you define "lean years". Is it based on global oil production volume, the profit margin of oil companies or the market cap of the US public petroleum companies? Eventually we may see a global oil consumption at half the current level. But at that time profit margins and the market cap of the CONSOLIDATED petroleum industry might be rather high. For instance would you consider the current period "lean" for the US publicly owned petroleum industry? Granted life (and profits) for those companies took a big hit when oil prices collapsed. But the vast majority of those companies are still in business and the combined value of their stocks are still significantly higher then it was before the recent boom. Remember: current oil prices are still higher then they were in 2006. Times may not be as "fat" as they were a few years ago. But they are also not as lean as they had been for the majority of the last 70 years thanks to current oil prices. And thanks to generous bankruptcy laws allowing companies to shed tens of $BILLIONS of debt acquired during the recent" "fat" times. Currently the petroleum industry is not in as bad a condition as some here have tried to spin. Sure it took a heavy hit when oil prices collapsed.
But we still have a firm grip on your balls as well as all the other consumers. LOL.
ROCKMAN wrote:That last little jab made at Ralfy made me wonder: are a lot of you thinking the US petroleum industry is currently in a panic mode? In general were not. Of course many of our creditors have been the last few years. LOL. The oil price crash hasn't changed THE major concern we had for years prior to the recent boom: diminishing number of viable oil drilling opportunities in the US.
The US petroleum industry is by far the most effective. Which is both good and bad news. Yes, we are one of the largest oil producer on the planet. But we got there by rapidly developing our reserves. Which leaves us with fewer to develop in the future AT THE CURRENT PRICE. The surge in oil prices did allow us to develop a resource that had been known for decades...the shales. We still have higher then average oil prices allowing to develop some new reserves. But the boom is over.
And don't think that ever pubco that understood the risk they were taking by overextending their credit didn't know those bankruptcy laws were out there just waiting for them to take advantage of. I've sat in meeting over the years with mangers who said something like: "Hey, what's the worst that could happen? We file Chapter 11." And laugh. Really: remember that CEO making $700,000 per year could still be pulling in the same salary while going thru Chapter 11: typically the bankruptcy court guarentees salaries after a filing is made.
Outcast_Searcher wrote:D - this is normal capitalism, and not surprising.
(As I've been saying over time, despite the hand wringing of the ETPers, the oil is still there, and long term, it will be gathered, processed and sold at a reasonable profit -- IF the demand for it is there (i.e. if alternatives like green energy don't remove the demand for it (in coming decades)).
The same thing happens in other businesses (witness the destruction of the retail space as the internet intrudes, or the past destruction of most of the shopping malls). Why should the oil biz be any different? Actually, given how volatile oil prices are, I'm surprised there isn't more financial turmoil than we normally see in the oil biz.
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