Oil Politics and the Stock Market
Experts telling: This is bad for us?
by Douglas StahlUsers
Have you noticed something strange in the Stock Market at the end of last year and so far this year? As the price of West Texas Crude Dropped below $50 dollars per barrel the stock market took a real tumble along with it. So as far as anyone on Wall Street can remember Oil going down has always been super positive news for the Stock Market. Lower crude oil price has always initiated incredible good things boost for the economy. The economy is supposed to explode to life when energy prices decline. . Profits should skyrocketed because all of input components of manufacturing and business get much cheaper. Energy cost are such a huge part of the expense of doing business. Shipping cost go way down. So why Did Markets go down and what happened?
The truth is that Oil Black Gold, Texas and the other oil producing sectors in the society have been making large sums of money and hiring thousands of people. They all have been drilling for $100 dollar a barrel oil. This happened in an American economy that was just barely chugging along since 2009. This was great news. Thousands of jobs were created when oil climbing to a mind numbing 130 dollars a barrel.
Thousands of Truck Drivers, Drillers, Investors , Land Men, Accountants and much more were working hard and making lots of money. Hard(dirty) manufacturing using steel and stamping machines to make things for the field and the drilling sites. Building new steel storage tanks with American workers in Cushing Oklahoma. Rolling up your sleeves and getting your hands dirty were considered cool and it paid off.
Consider this. Close to Twenty Percent of all US exports come out of Texas. Chemicals, Plastics, Polymers, and now Natural Gas. This will increase as the years go on.
The truth is that the United States is becoming more like the Third World Oil producers that we used to make fun of. The commodity of Natural Gas and bulk Plastics and Chemicals. We are getting a lot like Russia. Russia enjoys selling its Natural Gas and delivers much of it to Western Europe right now. This produces billions of dollars for the Russian economy. Our North American producers are attempting to compete with them with that lucrative business. With American inginuity we will soon dominate the World in Natural Gas Exports.
You can see it in the numbers.
LNG(Liquid Natural Gas) which the US has more of than any nation on the earth is booming. Natural gas is more abundant then Oil. LNG is created when you take natural gas and then freeze it. This creates a liquid and then you can load that on a ship and transport that across the world. Once it reaches it’s destination it can be turned back into a gas and create relative clean Electricity at a power plant using the Natural Gas as fuel. Natural Gas and LNG are very low priced right now and even more so than Oil but when the markets recover the United States will be exporting billions of dollars worth every year. This will keep the dollar value high and help fix our trade deficit.
Oil and LNG has turned out to be Ace in the USA Deck of Cards @ $80 or above is so profitable and employs so many people it is an “adrenaline hit” for the United States Economy. As they used to say in the old days. It is a real cash cow. Oil has become abundant again in America. But like anything so good it has some good and bad results associated with it. At $100 and above things got out of hand. The new Shale Drillers found too much oil at one time and their price finally dropped. Boom to Bust. This effects our foreign policy in a big way.
Take the standoff with Russia in the Ukraine. You may think that is all political. Well no. The Ukrainians sits on a terminus and distribution point for Gas from Russia to the rest of Europe. So most pipelines and traders and lots of the infrastructure for Russia’s booming Gas Sales to Europe go through the Ukraine. So the Oil and natural gas companies want to export American Gas will do very well if Russia closes off the Ukraine. Ukrainian middle men are so crooked that they ripped off both Russia and the European Union. They would act as middle men and take payment from both sides of the deal but then deposit funds in their own account in offshore investments. So when it came time to get paid neither side got their money. Billions of dollars are missing in the Ukraine.
Another downside to the boom in energy was Environmental cost. Fracking should not be allowed in certain sensitive areas. It needs to be regulated in a prudent manner as not to cause irreparable damage to areas.
LNG terminals can be very dangerous to the surrounding Ocean and regulators need to prevent these large temperature changes when liquefy the Gas or the reverse turning the liquid back to gas. Also an explosion can happen and of this magnitude should be looked at closely. But for the first time at the end of last Natual gas was liquified on the Gulf Coast and sold overseas. Ships were heading to Europe and Japan. This is great for the United States.
The problem is the Oil is part of a command economy that is world wide. The reason prices have tumbled is that the big producers who have a cartel are trying to push for each other’s market share. There are new producers coming on line. Iran the United States and Iraq to name a few. This will make it more difficult to keep the Opec Cartel together. Will our small domestic producers who survive the crash. Will they soon all get in line with Opec and push the price up over $100 again? They say in Economics that there are no long term Monopolies. Sooner or later others come along and try to do their own pricing.
Whatever happens it will be good for the United States. It will raise the price of the dollar and will help in our balance of payments. The government should impose strict environmental regulations but at the same time protect the local US Industry again. We did this for many years after the second world war. We should protect the local Oil industry to keep it from being a boom to bust cyclical industry. We should also treat energy as a strategic industry and important to our national well being. The oil boom was not lead by the major oil companies but by small and gas companies. Having many small nimble oil companies will help keep economy humming and and vibrant domestic Oil and Gas industry is essential to our well being and our American Stock Markets seem to agree with that.