Back in time just prior to the short bear market in 2000, the media shills were down playing the impact of rising oil to the economy. They laid out the narrative that since we transformed our economy from manufacturing to service that oil no longer effected its force. The real translation was don't worry about the millions of jobs lost because they will be replaced with cleaner, better paying jobs. Even the shills wouldn't attempt that drivel today. Instead, they now sell pseudo confidence to America by claiming that the fracking miracle has made America the number one oil producer again, and will lead to a renaissance in manufacturing. Yes, the same manufacturing that in 2000 was no longer wanted or needed because of ill effects to the environment. By the way we have lost 12 million high paying jobs in that sector and as you read, dear reader there are future dangers on the horizon.
No need to recount the present oil situation. We all are saving at the pump and I still stand with my prediction that both the federal government and various states will add gas taxes to the price we pay at the pump. However, in the duration to that time another aspect that I have bought to light is the point that small oil companies are facing financial stress due to low prices for their oil.
US Oil
at present is selling below $50. per barrel. There are many oil loans that are under water now just like the housing crisis in 2008. The price rallied recently with the approaching driving season, but it has not put a dent in supply. The oil build-up is currently at 458 million barrels and rising. Hold the press! Today's report adds another 8 million barrels which has forced prices back into the downtrend. So, small oil producers are hoping time provides a solution. The problem is if we pass the Fourth of July and prices stay in this range, bankruptcies will occur. Not only that, but big institutions and large hedge funds will take a big hit playing the contango game.
Let's Dance
no, not with the stars or even March Madness. This has been a recurring song played by the big boys. The future price of oil is lower than present in particular times. This is one. They buy a load of oil and store it until their profit picture is clear. Their problem is too much oil and lower prices, which will back fire their scheme. Capacity is limited and filling rapidly. If prices continue to decline and I think it will, they will dump more oil which will drive prices even lower. If one sells, the others may all rush for the selling door. This may be good for us as consumers, but bad for the economy.
Rid Count
is down to half of what it was last August. Eventually, there will be less oil produced and this is the thinking of the contango people. They are also hoping that time provides a solution. As you see, dear reader, oil is in the prayers of pagans. In the duration the rails are effected. Commodities are very important to the transports. When oil frackers work, they need sand. The railroads bring them sand and then, take their oil for delivery. The problem is production is stalling. Future spending is down and no one needs sand. The trains arrive empty. The first rule of a restaurant is never come to the kitchen without something like an empty plate in your hands. Trains come empty and leave half full. The Baltic Shipping Index is at all-time lows. Oil is the most important commodity and the US will be hurting as the global community already feels the pain.
At the moment oil refineries are switching from winter blends of gas to the summer stock. It is cheaper form of gas and profits are up, but July looms. What do you do with product not sold and it is time to switch again for the next winter.
By the way less rigs means less employment which affects housing, retail, everything. As I stated many times, things are related. The Fed is the root cause in this pyramid. They provide cheap money. Small under-capitalized firms found ways to borrow to dig. They are now in hot water. Big money placed bets on rising prices with cheap money and derivatives could be effected. They too will suffer losses. Rails will cut back on new cars, engines and lines. More layoffs which will effect local retail and one day another shopping center closes. The shills will get excited about internet sales while you and me feel the effects of a failed fiat system. The bear will be here before you realize the bull is gone which is why I say, End the Fed!
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