By John Rubino – Re-Blogged From Dollar Collapse
For a while there it looked like the US and its main trading partners had finally achieved escape velocity. Growth was up, inflation was poking through the Fed’s 2% target, and most measures of consumer sentiment were bordering on euphoric.
Then it all started to evaporate. Lackluster manufacturing and consumer spending reports sent the Atlanta Fed’s reading of Q1 GDP off a cliff to less than 1%:
Venezuela’s deepening chaos could soon create tremors in the global oil markets.
Already in an economic and humanitarian crisis, Venezuela’s oil production — the country’s sole lifeline for revenue — has hit a 13-year low.
As the situation worsens, Venezuela’s oil output could plunge even lower. A new report by Columbia University’s Center on Global Energy Policy calls Venezuela a “growing supply risk for oil markets in 2017.”
Oil prices are currently around $45 a barrel, a dramatic drop from about $110 two years ago. The main reason for the low prices is that there’s too much supply globally. However, the line between oversupply and a shortage in the oil market is thin, and Venezuela could tip the scale in the opposite direction.
By David Haggith – Re-Blogged From Great Recession Blog
The crude oil price rally has been completely destroyed, though I’ll admit I was wrong when I predicted crude oil prices would plummet in March or April as the perfect storm developed against oil prices. Instead, they rallied. In spite of that, I continued to believe my error was in timing and not in fact — not in the fact that another harsh fall in oil prices was beating a path to our doors.
So, I continued to write articles about the forces building against oil prices, even in the face of a strong rally, which many believed would set a new position for oil for the remainder of 2016. That storm has, as of today, completely clawed back the post-March rally by taking crude oil prices back to a three month low and to where they stood at the start of the year as well. West Texas Intermediate just struck $42/barrel today.
By Matt Egan – Re-Blogged From CNN Money
Stress in the oil industry is starting to contaminate other parts of the American economy.
For the first time since oil prices began crashing in mid-2014, banks polled by the Federal Reserve are warning of a “spillover” effect onto loans made to businesses and households in energy-dependent regions of the country.
Senior loan officers of nearly 100 banks acknowledged that credit quality has “deteriorated” on everything from auto loans and credit cards to commercial real estate mortgages. Translation: More people aren’t paying and delinquencies are rising.
It’s a sign of how the deep spending cuts, mass layoffs and even bankruptcy filings in the oil patch are inflicting real pain in certain energy-focused states like Texas and North Dakota.
Some large U.S. banks have individually warned of early signs of so-called contagion.
By Matt Egan – Re-Blogged From CNN-Money
The Saudi Binladin Group, a massive construction company founded by the father of the late al Qaeda leader Osama bin Laden, has laid off at least 50,000 workers, according to local press reports.
The job cuts come as the Saudi government has delayed payment to construction firms and cut spending to grapple with the plunging price of oil, which makes up three-quarters of the government’s revenue.
Saudi-based newspaper al-Watan reported the Binladin Group terminated the contracts of 50,000 workers — mostly foreigners — and has given them permanent exit visas to leave the country. Some workers refused to leave the kingdom because they claim the company has not paid them for months, the paper reported.
The Saudi military confirmed to al-Watan that protesting workers torched seven buses in Mecca — a rare sight in Saudi Arabia, which Human Rights Watch has criticized for cracking down on free speech and imprisoning peaceful dissidents.
The layoffs are on top of the 15,000 workers cut last year after the Binladin Group’s contracts were frozen when a crane collapsed at Mecca’s Grand Mosque last year. The incident killed more than 100 people and the company was involved in the expansion project.
By David Haggith – Re-Blogged From The Great Recession
Last week, I wrote that the day would come soon when oil prices would take another nasty dive because there is nowhere left to store oil, causing the spot price for immediately delivery to dive toward the zero bound. This week we see how close that day is as oil continues to be oversupplied by about a million barrels a day.
Reasoning simple: When all ships, tank cars, tank trucks and tank farms are finally full, immediate delivery of oil will be nothing but a liability. That kind of delivery is called “an oil spill” because all you can do is pump it onto the ground or into the sea … or start filling swimming pools, as one oil industry analyst said is the next step. Production will have to slow to whatever the rate of consumption is, as it will become a situation of one tank used before one tank is bought.
The Wall Street Journal reported on Monday that oil tankers are backing up at the world’s largest oil seaport. In fact, buyers and sellers of oil are increasingly sending tankers on longer voyages just to avoid a pile-up of tankers at several ports.
Up to 50 oil tankers are waiting to unload cargo in the port of Rotterdam, the highest number since 2009 and another sign that, amid a glut, crude is struggling to find a home. (WSJ)
By Andrew Follett – Re-Blogged From http://www.CFACT.org
Cheap coal, oil and natural gas are outcompeting wind and solar power despite massive government support, and environmentalists are really upset about it.
“I believe low energy prices may complicate the transformation, to be very frank, and this is a very important issue for countries to note; all the strong renewables and energy efficiency policies therefore may be undermined with the low fossil fuel prices,” Fatih Birol, the executive director of the International Energy Agency (IEA), told reporters in Brussels.
Americans are spending less on energy than they have at virtually any other point in recent history. Energy prices dropped by 41 percent in 2015 due to innovative new techniques to extract hydrocarbons, like hydraulic fracturing and horizontal drilling.
Environmentalists are also terrified that the rise of cheap conventional energy will hurt wind and solar.
