The Crash of 2015, Day 49: Hell to Pay

You have this perfectly good structure, and then you kick out a few of the supporting pillars, and the next thin you know the SEC is on the phone.

What do you mean, Uncle Clarence didn’t believe they were going to do it, and stayed in his room?

I know, it’s old news. If I stop by on Monday and tell Oscar Oblivious that his house appears to be on fire, he is of course concerned. But when I stop by on Wednesday to say it’s still burning, has consumed most of the structure, and collapse appears to be imminent, he demands to know why I am bothering him with old news. The Crash of 2015, the burn and crash of the economies of much of the world into — at least — serious recession for a very long time, is well under way. It is of course no news at all for the mainstream media, transfixed as they are with simpler stories of happier, imaginary times. But for you who come here from time to time, it’s old news. How is it then that you are still in the burning house? Continue reading

Oil Prices: A Simple Explanation

graph graph

A glance at this simple chart shows how oil prices are determined, and by whom. To the best of our knowledge.

To paraphrase an old saying: For every event there is an explanation that is simple, obvious and wrong. For example, ask why oil prices started to plummet last fall and the simple, obvious answer is: too much supply, mainly because of the American fracking boom, and too little demand because of weak and weakening economies. I have ever been suspicious of people, such as weather forecasters and stock brokers, who have no idea what’s going to happen 24 hours from now but once it happens can immediately explain why it happened, in excruciating detail. Thus on January 7th in this space, I asked a question about this simple and obvious explanation, offered by people who had no clue ahead of time that it was going to happen. The question was this: On what planet does an oversupply of two percent for a machine burning 90 million barrels a day lead to a 50% drop in prices? Continue reading

Grid Lock and Load Shedding: Why the Lights Are Going Out

The lights went out in Hoboken in 2012. They’re going out more often, for longer, in more places. Are you ready? (Photo by Alec Perkins/Flickr)

The lights went out in Hoboken in 2012. Thank goodness we don’t live in one of those backward countries where it happens all the time. (Photo by Alec Perkins/Flickr)

[Irony alert; avoid reading if allergic.] 

It is amusing to see — from the vantage point of the world’s number one economy, soon-to-be-number-one oil-and-gas producer, number one military power and just all around exceptional nation — the rest of the world struggling to keep the lights on. The poor beggars don’t seem to have the capacity to understand what it takes to run large enterprises and be Number One.  Examples abound: Continue reading

The Crash of 2015: Day 29 [UPDATE Day 30]

You have this perfectly good structure, and then you kick out a few of the supporting pillars, and the next thin you know the SEC is on the phone.

Maybe we could still live in the top floor? If we could just slow it down a little?

A couple of things to keep firmly in mind as we watch the Crash of 2015 unfold, pretty much on the schedule I’ve been writing about here for six months. First, the drop in oil prices is not the cause of this disaster, merely an accelerant. The fracking industry is succumbing to its inherent high expense, toxicity, rapid depletion rates and over-reliance on junk financing. Similarly, the stock market crash we expect to follow the fracking collapse would have come anyway because of its inherent instability, and indeed may yet occur before the chain reaction in the fracking fields has run its course. And finally, what is happening to fracking is also happening to the legacy oil business, only slower. Continue reading

The “Worst News of 2015” Just Got Worse

Just a garden-variety protest in some Middle Eastern county, you say, nothing to be afraid of here? Wait till you find out where these people are. (BBC Photo by Safa Al-Ahmad)

Just a garden-variety protest in some Middle Eastern county, you say, nothing to be afraid of here? Wait till you find out where these people are. (BBC Photo by Safa Al-Ahmad)

The news photo I labeled the scariest of 2014, back in August, and the news story I called the worst of 2015 a few weeks ago, just got scarier, and worse. The photo was of demonstrators who have managed to keep an insurgency alive in the Eastern Province of Saudi Arabia for three years despite everything a boundlessly wealthy state can do to snuff it out. Bad for us, because the Eastern Province is where the Saudi oil is. The worst news of the year for us was that the Saudi king was in hospital with a terminal illness. Now the king is dead, and the difficulties faced by his successor just became worse by at least an order of magnitude. Continue reading

The Crash of 2015: Day 21 [Update: Day 22]

Hold on a second, we’ve changed our minds. Can you just hold it right there, please? We’ve decided we like it the way it is…..

The economy of the United States and the world is on fire, and with the flames and smoke visible in any direction one cared to look, the President of the United States declared last night that the worst is over, “the shadow of crisis has passed,” and happy days are here again. In reality (a state that presidents and candidates for president never seem to visit) 2015 is shaping up to be one of the worst any of us have ever seen.

It’s a potent mix of flammable situations, from an unhinged stock market to a drought-ravaged West to the fiscal convulsions of China, Russia and Europe. But for us in America, the collapse of the bogus New American Oil Revolution is the fire that’s burning hottest and spreading fastest. This is how it’s likely to go: Continue reading

The Crash of 2015: Day 9

You have this perfectly good structure, and then you kick out a few of the supporting pillars, and the next thin you know the SEC is on the phone.

You have this perfectly good structure, and then you kick out a few of the supporting pillars, and the next thing you know the SEC is on the phone.

With oil prices at about half what they were six months ago, the most vulnerable players in the oil business, the frackers who brought about the new American Oil Revolution, are imploding. If you think that’s just their end of the boat sinking, no worries here, think again. They are, or were, the last best hope of continuing the oil bonanza, and they’re done. As soon as that fact is so obvious that even Faux News has to admit it (this may take a few months), it will dawn on us all that the very same thing is happening to the deep water drillers, the Arctic drillers and the tar sands wringers.

It would have happened at any oil price. The slump has merely brought it on sooner, and will force us to face — this year! — the reality that we will never again have quite enough cheap oil. That’s the meaning of the Crash of 2015. Now, about the schedule: Here’s what’s happened, what’s happening and what’s about to happen. Continue reading

Attention in the Crowded Theater: Fire!

030328-M-0000X-005

Firefighters try to snuff an oil well fire in Iraq in 2003. What is happening to the oil business today, especially in the United States, is akin to a thousand such fires. (Wikipedia Photo)

The flames of the next financial crash are leaping up everywhere you look (if you look without wearing the rose-colored glasses): in the Bakken fracking fields of North Dakota, the Eagle Ford in Texas, the tar sands of Alberta, the deep waters of the Gulf of Mexico. They are lighting up the night sky in all directions, and in the daytime the smoke is sickening the light and smelling up the air in the skyscraper offices of the Masters of the Universe where they shuffle decks of junk bonds, subprime loans and derivatives. Along with the smoke, you can smell the fear. This is going to be bad. Continue reading

The Oil Crash is Under Way [UPDATED 12/13]

When big trees come down, they start slow and end with a crunch. (Photo by geograph.org.uk)

When big trees come down, they start slow and end with a crunch. (Photo by geograph.org.uk)

When you are felling a really big tree, the first signs that it is coming down are subtle; a crack here and there, a twitching of the crown. By the time these clues register on you, the tree is on its way down. The cracks and twitches from the U.S. oil industry are coming almost hourly now, and although it is a really big tree, and won’t actually hit the ground until next year, its fate is pretty well sealed. Here are this week’s signs and portents: Continue reading

Rage Against the Dying of the Lights

The lights went out in Hoboken in 2012. They’re going out more often, for longer, in more places. Are you ready? (Photo by Alec Perkins/Flickr)

The lights went out in Hoboken in 2012. They’re going out more often, for longer, in more places. Are you ready? (Photo by Alec Perkins/Flickr)

Much of Detroit went “gentle into that good night” this week, its entire municipal power grid succumbing to age, infirmity and neglect.  It was no big surprise, Detroit’s public buildings (schools, fire and police stations, courts, a hospital, etc.) and traffic signals went dark in 2010, 2011 and 2013. Nor would it have surprised the readers of a recent study [“The Technology and Sociology of Power (Failure)”] whose authors concluded that “Blackouts are dress rehearsals for the future in which they will appear with greater frequency and severity, and as urban areas become more compact, with greater consequences.”

The world, they said, should “prepare for the prospect of coping without electricity as instances of complete power failure become increasingly common.”
Continue reading