All Posts Tagged With: "oil"

Because the government has been overpromising, overcommitting and overspending for decades, it is hurtling toward a fiscal train wreck. The numbers have stopped adding up. Looking out, there’s NO WAY that most Western governments can ever pay their ongoing obligations or pay off past debt.

There are thousands of oil wells in the Gulf. They drill a thousand per year. They have one accident and the press makes a big deal of it. But oil spills are not very harmful. In fact, they’re good things. There are natural oil leaks all the time… Millions of gallons leak into the oceans, a thousand times more than from the Macando well.

Forcing the more productive, intelligent and resourceful people in the economy to bear the weight of those who should be going out of business is just stupid. That hasn’t stopped countries from trying it. But the IMF points out that most countries abandon it. And what would happen to government revenue when the economy slows?

With only so much oil to go around, every new off-take agreement signed by the Chinese with the Saudis or Venezuelans, for example, is a net loss in supply to other bidders, notably the world’s largest energy consumer, the United States…

Goldman’s oil analyst Jeffrey Currie is referring to what we termed last year, “The Long Aftershock.” It refers to the 2007 oil price crash sowing the seeds for the next oil bull market. Currie says his analysis leads to the conclusion that, “By 2011, the [oil] market is back to capacity constraints…The financial crisis created a collapse in company returns which has significantly interrupted the investment phase.”

Bullard said, that, “If the economy came in very weak, let’s say, in 2010, weaker than expected, we would have the option of doing further quantitative easing.” The Fed would do this through additional asset purchases, presumably with more, uh, “money” it created.

Are we changing our tune, then, about what to expect from markets? Not one bit. But the question now is timing. The collapse of 2008 was so severe because of the sudden reduction in leverage in the financial sector. As assets fell in value, the most highly leveraged firms (or lenders who raised money by selling debt) went out of business.