Strange Bedfellows: Frackers and AntiWar Activists
Saudi Arabia has committed countless war crimes in Yemen with American planes and bombs.
Not only does the Trump Administration not care about this, they seem proud of it.
But the Trump Administration does care about mass layoffs in Texas during an election year, and by a strange twist of fate Frackers and AntiWar Activists have wound up on the same side of an issue.
Mr Trump said on Saturday that he would do “whatever I have to do” to protect the US industry, which is facing the prospect of mass job lay-offs and production shut-ins, especially in the local shale sector.
He has also hinted that US military aid to Saudi Arabia could be on the line, reflecting the depth of the schism with one of its closest allies in the Middle East.
Frackers have recruited Rick Perry, who was President Donald Trump’s energy secretary, to lobby for them, and suspending US military aid to Saudi Arabia is part of the agenda.
Most shale producers are unprofitable at prices below $50 a barrel, so the current price of $20 a barrel is a catastrophe.
The uncomfortable fact for President Trump is that despite his long-standing criticism of OPEC and his support for free energy markets, he needs the cartel’s market intervention to keep shale producers afloat.
It's ironic that one outcome of this crisis is that the U.S. and Canada will likely be joining OPEC.
Global crude demand has fallen by a third, more than 30m barrels of day of demand, the biggest drop in history, because of the pandemic.
Even without the price war, there will be a massacre in middle America.
Nearly 100 US oil and gas producers could file for Chapter 11 over the next year, according to Buddy Clark, co-chair of the energy practice at Houston law firm Haynes and Boone...
Even companies in the Permian Basin, the low-cost oilfield in West Texas that has led America's energy boom, require an average of $49 a barrel to profitably drill, according to a survey by the Dallas Federal Reserve.
At $40 a barrel, only 15% of oil companies would survive for a year or less, the Dallas Fed survey found. Another 24% of oil companies might be able to hold out for one to two years.
Many frackers survived the 2014 oil price crash by borrowing. That window is now closed.
Defaults on high-yield energy bonds could potentially spike to 30%, they added...
The percentage of oil and gas companies with distressed credit ratios spiked from about 25% at the end of last year to 94% in mid-March, according to S&P Global Ratings...
And now that cash-strapped oil companies need to refinance their debt, the junk bond market is closed. No energy junk bonds were issued anywhere, to any company, in February and March, according to Dealogic.