The Corona Virus and Russian/Saudi Price War is Wiping Out the Oil Industry in the US

April/01/2020 9:45AM
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oil field2020: The Year Of The Oil Bankruptcies

A bankruptcy boom has hit the oil and gas industry, and it’s just getting started. Investors have lost their appetite for shale, and energy debt has become among the least desirable in the market.

The industry has been teetering on the verge of mass hysteria for much of 2019 as a record number of energy companies folded.

According to Energy and Restructuring law firm Hayes and Boone’s, a grand total of 50 energy companies filed for bankruptcy during the first nine months of the year, including 33 oil and gas producers, 15 oilfield services companies and two midstream companies.

In contrast, 43 oil and gas companies filed for bankruptcy for the whole of 2018.

The biggest oil and gas bankruptcy of the year–indeed, the biggest since 2016–was EP Energy, which filed for bankruptcy in October, unable to pay back some $5 billion in debt.

Now, some observers are warning that the shakeout will pick up serious momentum in 2020.

This was written before the Coronavirus hit.

The dividend you have received from the oil industry and the shale production in crude began before the Trump tax bill and was far greater than his tax benefit. For years now we have had energy independence and low prices for gasoline, diesel, heating oil, jet fuel, and natural gas. That has put thousands of dollars in consumers’ pockets.

You know it’s a good thing because there have been no Congressional hearings on price-fixing by the industry. I tried to go back and see how many of those there have been since the 1974 embargo years but I stopped at 12. See, Congress thinks you are stupid. When gas prices spike they hold hearings and go back to sleep.

If crude prices stay low because demand in so low and more companies get wiped out Congressional hearings may be back. If the shale production grinds to a halt gas prices will go back up as demand comes back and it will take time to get production back.

Funny thing when demand was high and crude was tight and prices were high we had Congressional hearings. When demand is the lowest in 30 years prices go down and there will be no bailout for this industry because politician can’t stand the heat. Thousands of high-paid union jobs will vanish. You will pay through the nose for petroleum products until shale gears back up.

Congress will turn to crackpot ideas like turning food into oil and hold hearings.

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