My base case view matches what is priced into the markets: the crude oil market is glutted and demand is falling off a cliff. Storage constraints are in sight, and I am not seeing an immediate catalyst for a demand rebound. The nearly inevitable outcome is that drilling drops dead, and capacity is shuttered. At some point, one will be able to take the chart of U.S. crude liquid products (conventional oil plus the products of fracking), stick a red line through the maximum value, and all other values on the chart will below that maximum. In common parlance, this behaviour is known as a "peak." As a long-suffering card-carrying Peak Oil believer, I will be flooding the internet with "I told ya so!" missives.
I accept that one can generate some scenarios where a peak does not occur near this point. Meanwhile, I am not saying that this will be a maximum for all time; this is a "local maximum." However, I am not incredibly optimistic that the U.S. will be able to take another run at the 20 million barrels per day level any time soon....US oil production depends on the cartel to maintain prices above market price owing to the high production cost of US oil relative to other major producers. The US as swing producer was never going to happen.
The practical alternative is for the US to nationalize oil have the government eat the difference between market price and production cost. While this would be anti-capitalistic and seemingly would be rejected out of hand, nationalization would be justifiable based on national self-sufficiency in vital resources.
Bond Economics
U.S. Oil Production In Process Of ... Peaking
Brian Romanchuk
2 comments:
Yo, They have the price of their own product in their cost models... if the price goes down their production costs go down...
The whole thing is a scam....
No need to nationalize when PPP (Public Private "Partnership") is available.
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