Oil price drop.. Don't panic (real estate market, foreclosures, mortgage)

[cBach]

I don't know why people are doing a hypothetical "What if the government wouldn't have shutdown the economy?" It doesn't make any difference, it has been done and now we have to manage this.

A simple coalition of state commissions that vote together as a block would do a lot to mitigate unforeseen impacts from OPEC and Russia. Right now they conspire against us and cause us harm but all we have to fall back on is "the market". We need something stronger to stand up to them, so if they are going to flood the market, we have options.

I'm tired of OPEC and Russia always calling the shots wrt O&G. Houston is the O&G capital of the world, the US should be calling the shots. We need a government entity. I don't want to talk what ifs, we need to deal with the current situation.

[Jack Lance]

Originally Posted by LocalPlanner

Other governments around the world had shutdowns as well - the shutdown in China set off the whole drop in oil price. Much or most of our domestically produced oil is exported (our refineries aren't set up for light sweet crude), so the foreign shutdowns may have hurt domestic oil more than the U.S. shutdown did.

So we treat exporters differently ? Are we going to totally destroy, or allow to be destroyed our exports ? That would set a bad example don't you think ? All any foreign competitor would have to do to kill competition from American is find some pretense to shut down their demand while still exporting to us. Besides Airlines make a good deal of their revenue from foreign flights don't they ?

We still consumed 21 million bpd and only produced 13 mbpd . The export of oil is more of a logistics dynamic as you mentioned, than a supply situation. I bet we are still consuming more than 13 mbod. O & G deserves to be treated like any other American industry.

[ParaguaneroSwag]

I agree. People are panicking too much. In the short term it’ll be horrible. But in the long term it’ll be better that this was went through

[LocalPlanner]

Originally Posted by Jack Lance

So we treat exporters differently ? Are we going to totally destroy, or allow to be destroyed our exports ? That would set a bad example don't you think ? All any foreign competitor would have to do to kill competition from American is find some pretense to shut down their demand while still exporting to us. Besides Airlines make a good deal of their revenue from foreign flights don't they ?

We still consumed 21 million bpd and only produced 13 mbpd . The export of oil is more of a logistics dynamic as you mentioned, than a supply situation. I bet we are still consuming more than 13 mbod. O & G deserves to be treated like any other American industry.

Exactly, since we shouldn't be doing protectionism and socialization of losses for other industries either. Including (yes, I am actually saying this) agriculture.

[Jack Lance]

Originally Posted by LocalPlanner

Exactly, since we shouldn't be doing protectionism and socialization of losses for other industries either. Including (yes, I am actually saying this) agriculture.

That ship has left the dock as they say....

[cBach]

Originally Posted by LocalPlanner

Exactly, since we shouldn't be doing protectionism and socialization of losses for other industries either. Including (yes, I am actually saying this) agriculture.

If we didn't subsidize agriculture there would be years with really cheap food prices and other years you wouldn't be able to get avocados, tomatoes, peaches, etc... A stable food supply is one of the most important things a country needs. If you let farmers go bankrupt that farm goes fallow and no produce is grown. Yes another multinational can take over the farm but there could be a seasonal lag and seasons count with agriculture.

You run out of food supply in a country and nothing else matters, people start rioting in the streets. Yes, let's keep the food supply stable.

[LocalPlanner]

What is the limit for declaring an industry "strategic"? We already did that eleven years ago in a big mistake with saving the automobile industry (it doesn't matter that it got paid back, it was wrong - and the fact that it's a union industry should have no bearing on this) and are doing the same with airlines and Boeing. Not to mention that we basically did it with the financial industry and invited moral hazard. Are all these industries "strategic"? Look, I get that the airlines were largely forced into their current situation by the government, so maybe some help is due. You can bet that if some critical component of tech manufacturing is compromised by another country (since many critical components are only manufactured overseas), those companies will be screaming for help as a "strategic industry" too, despite the fact that they knew the risks. A good government won't indulge them.

But the domestic oil industry knew the risks of depending on foreign governments for their bread and butter. In business management theory, this is called "political risk." You're supposed to build it into your business model. Our domestic oil companies largely failed to account for it, even though they had to be aware that it could happen (albeit perhaps not in pandemic form, but it could happen in lots of ways). So is the federal government supposed to subsidize refiners (mostly big oil companies like XOM and CVX) to modify their refineries so they can now accept domestic oil, just so we can have our "strategic resource"?

[ParaguaneroSwag]

Originally Posted by LocalPlanner

What is the limit for declaring an industry "strategic"? We already did that eleven years ago in a big mistake with saving the automobile industry (it doesn't matter that it got paid back, it was wrong - and the fact that it's a union industry should have no bearing on this) and are doing the same with airlines and Boeing. Not to mention that we basically did it with the financial industry and invited moral hazard. Are all these industries "strategic"? Look, I get that the airlines were largely forced into their current situation by the government, so maybe some help is due. You can bet that if some critical component of tech manufacturing is compromised by another country (since many critical components are only manufactured overseas), those companies will be screaming for help as a "strategic industry" too, despite the fact that they knew the risks. A good government won't indulge them.

But the domestic oil industry knew the risks of depending on foreign governments for their bread and butter. In business management theory, this is called "political risk." You're supposed to build it into your business model. Our domestic oil companies largely failed to account for it, even though they had to be aware that it could happen (albeit perhaps not in pandemic form, but it could happen in lots of ways). So is the federal government supposed to subsidize refiners (mostly big oil companies like XOM and CVX) to modify their refineries so they can now accept domestic oil, just so we can have our "strategic resource"?

It's really not rocket science. It's a very simple strategy. The larger oil companies (Halliburton, Shell, Phillips 66, Exxon, Chevron, OXY etc) and also the companies backed by OPEC, have the resources to live this out and then some. Smaller oil companies then go bankrupt and can't afford to keep drilling bringing supplies down. In the meantime, demand gets higher as people start moving on from the pandemic and Fuel is needed more.

[As Above So Below...]

Originally Posted by ParaguaneroSwag

It's really not rocket science. It's a very simple strategy. The larger oil companies (Halliburton, Shell, Phillips 66, Exxon, Chevron, OXY etc) and also the companies backed by OPEC, have the resources to live this out and then some. Smaller oil companies then go bankrupt and can't afford to keep drilling bringing supplies down. In the meantime, demand gets higher as people start moving on from the pandemic and Fuel is needed more.

This. The companies that get screwed are smaller upstream companies and oil service companies. The giants and downstream companies aren’t going anywhere.

[Jack Lance]

Originally Posted by LocalPlanner

What is the limit for declaring an industry "strategic"? We already did that eleven years ago in a big mistake with saving the automobile industry (it doesn't matter that it got paid back, it was wrong - and the fact that it's a union industry should have no bearing on this) and are doing the same with airlines and Boeing. Not to mention that we basically did it with the financial industry and invited moral hazard. Are all these industries "strategic"? Look, I get that the airlines were largely forced into their current situation by the government, so maybe some help is due. You can bet that if some critical component of tech manufacturing is compromised by another country (since many critical components are only manufactured overseas), those companies will be screaming for help as a "strategic industry" too, despite the fact that they knew the risks. A good government won't indulge them.

But the domestic oil industry knew the risks of depending on foreign governments for their bread and butter. In business management theory, this is called "political risk." You're supposed to build it into your business model. Our domestic oil companies largely failed to account for it, even though they had to be aware that it could happen (albeit perhaps not in pandemic form, but it could happen in lots of ways). So is the federal government supposed to subsidize refiners (mostly big oil companies like XOM and CVX) to modify their refineries so they can now accept domestic oil, just so we can have our "strategic resource"?

When the Government shuts a whole economy down at any particular point it is picking winners and losers. Free enterprise is disrupted . Businesses are supposed to take risk all do at some point in their existence , by shutting the economy down at this point you are not allowing those risk evaluations to play out in the real world economy. Yes the price war was a huge factor in the current economic crisis but how many of the companies that you would allow to go belly up have survived a mere price war business climate ? Without the shuttering of the economy would oil futures have gone negative ? The answer is no. Maybe we would have $15 future contracts but would we have -$40 future contracts naw I don't think so.

Energy is strategic ,without it industries such as agriculture, construction, shipping and trucking, Deliveries ect would not be able to function. On the other hand Smart phones are not strategic, neither is Yacht building or sport car manufacturing. Oil is still the most important commodity to the modern world and we need a domestic oil industry that's capable of at least supplying our basic needs like 13 mbod.

BTW if our domestic oil consumption falls 38% guess how much oil the US would be consuming per day ? Ha you guessed it 13 mbod.