Thanks, universe!

To have it crash like this really means that we are now in a deflationary global depression. The repercussions of oil collapse are massive, for global GDP, wealth, and employment. This was a perfect storm with the supply rocketing into space and the demand crashing. The US, Saudi Arabia and Russia all contributed to creating supply way beyond reason. The world pandemic seriously shrunk the demand. But the demand for consumer goods and capital goods is crashing amidst hyper bubbles busting everywhere. The price of housing in the metropolitan Boston area could easily crash by a factor of 4 in normal times. Now we may be looking at a factor of ten, or no market at all. The Fed is printing trillions of dollars, but putting it where it will do no good at all, big corporations. They need customers and people are in debt, losing jobs, and have no money to buy their goods and services. So what if Boeing is building planes again. The airlines are retiring planes as fast as they can and laying off workers since they don't have customers. Do they need new planes? Besides having no customers the driving force behind new planes is fuel efficiency. At near zero dollars for a barrel of oil that factor disappears. If we were smart we would build out high speed rail now as an emergency project. It creates jobs, and real estate will be dirt cheap. And it runs off of electricity, not fossil fuel. But we are much more likely to support a dying market as air travel gets ground into the dirt.

If the government really wants to save the economy and minimise the downturn it would be about relieving consumers of debt and also sustaining their incomes. But the government and both political parties are fully controlled by the ideological Right and the oligarchs and would never directly help the people. OK, but if you don't do that then there will be no consumer economy and that's 70% of the US economy. Supply side is ideological junk economics, but it dominates in the US today. Keep the big corporations going and preserve the wealth of the oligarchs and all will be good. Nonsense!

was the greed of the US frackers. They refused to cut back. Without a constant flow of new dollars, their (effectively) ponzi scheme would collapse. They figured the Saudis and Russia would cut back first because both these nations use oil to fund their national budgets (Saudi Arabia 80%, Russia 30%). But Putin wasn't going to play this game. He had the buffer of 3 to 4 years profits tucked securely away in Russia's national welfare fund for such a rainy day. For him, it was to be an all or none cut back by every player in the game.

The Saudis figured they could wield their big stick and force Russia to comply so they pumped up the supply. But Putin stood firm until he got all the other players in the game to also make cuts. He knew he had all the high cards in the game. This, of course, doomed the US frackers.

Did you know that the US, despite this glut of oil on the markets, was still purchasing shiploads of Russian heavy oil?

There is an overabundance of light oils in the American market and, at the same time, there is a shortage of the heavy oils needed by the gulf refineries. These refineries are what produce all the chemicals, pharmaceuticals and plastics that are such a huge part of our and the world's economies. Hundreds of billions of dollars were spent on these refineries to process heavy oils when the country was experiencing a "peak oil" crisis at the turn of the century. It was expected the heavy oil would come via pipeline from the Canadian tar sands. Light condensates from fracking would be sent up north to thin the tar enough to flow and then be sent to the huge gulf coast coking refineries via the now defunct Keystone XL pipeline.

Enter option #2 - Venezuelan Orinoco heavy oils which could be shipped relatively cheaply across the Gulf. But greed got in the way. The US oil majors wanted full privatization of these fields and the Venezuelan government said "Fuck you. This oil belongs to the poor people of Venezuela not the greedy capitalists. You can buy it at regular market prices." Then the US then had a tantrum and set out to destroy the economy of the country and try to steal the oil. Old habits die hard. Scratch an anti-Venezualan legislator and you will find some black oil oozing out.

The coronavirus pandemic has caused oil demand to drop so rapidly that the world is running out of room to store barrels. At the same time, Russia and Saudi Arabia flooded the world with excess supply.

This statement is not quite accurate. It was the US itself that set the stage by their overproduction during the last decade. The Saudis were the only ones to actually increase production. The Russians refused to increase or decrease production. They simply stayed the same until everyone at the table took their fair share of the necessary cuts.

Another factor adding to the collapse was the US oil interests failed to get authorization for 3 billion dollars slated to buy oil for the Strategic Petroleum Reserve in last US budget.

One last nail in the fracker's coffin is that tight oil tends to get gummed up when shut down. This will effectively destroy these wells leaving a lot of the oil permanently sealed off.

So, maybe there is a small ray of sunshine coming through the coronavirus clouds.

Jim Kunstler described the shale calamity. NOTE THE DATE:

http://redgreenandblue.org/2018/04/24/james-howard-kunstler-fracking-sha...

James Howard Kunstler: Fracking through the shale oil illusion on the road to peak oil
Published on April 24th, 2018

It was an impressive stunt and it had everything to do with the reality-optional world of bizarro finance that emerged from the wreckage of the 2008 Great Financial Crisis.

… The shale oil industry was a prime beneficiary of this new hyper-debt regime. The orgy of borrowing was primed by Federal Reserve “creation” of trillions of dollars of “capital” out of thin air...”

… The discovery of new oil had been heading down remorselessly for decades, to the point that the world was fatally short of replacing the oil it used every year with new supply. The last significant big fields — Alaska, the North Sea, and Siberia — had been discovered in the 1960s and we knew for sure that the first two were well past their peaks in the early 2000s. By 2005, most of the theoretically producible new oil was in places that were difficult and ultra-expensive to drill in: deep water, for instance, where you need a giant platform costing hundreds of millions of dollars, not to mention armies of highly skilled (highly paid) technicians, plus helicopters to service the rigs. The financial risk (for instance, of drilling a “dry hole”) was matched by the environmental risk of a blowout, which is exactly what happened to BP’s 2010 Deepwater Horizon platform in the Gulf of Mexico, with clean-up costs estimated at $61 billion.

Technology — that El Dorado of the Mind — rode to the rescue with horizontal drilling and fracturing of ”tight” oil-bearing shale rock. It was tight because of low permeability, meaning the oil didn’t flow through it the way it flowed through normal oil-bearing rocks like sandstone. You had to sink a pipe down, angle it horizontally into a strata of shale only a few meters thick, and then blast it apart with water under pressure and particles of sand or ceramic called propants, the job of which was to hold open those fractures so the oil could be sucked out. Well, it worked. The only problem was you couldn’t make any money doing it.

The shale oil companies could get plenty of cash-flow going, but it all went to servicing their bonds or other “innovative” financing schemes, and for many of the companies the cash flow wasn’t even covering those costs. It cost at least six million dollars for each shale well, and it was in the nature of shale oil that the wells depleted so quickly that after Year Three they were pretty much done. But it was something to do, at least, if you were an oil company — an alternative to 1) doing no business at all, or 2) getting into some other line-of-work, like making yoga pants or gluten-free cupcakes.

… The unfortunate part of the story is that the shale oil miracle only made this country more delusional at a moment in history when we really can’t afford to believe in fairy tales. The financial world is just now entering a long overdue crack-up due to the accumulating unreality induced by Federal Reserve interventions and machinations in markets. As it continues to get unglued — with rising interest rates especially —  we will begin to see the collapse of the bonding and financing arrangements that the fundamentally unprofitable shale “miracle” has been based on. And then you will see the end of the shale “miracle.” It is likely to happen very quickly. It was fun while it lasted. Now comes the hard part: getting through this without the nation completely losing its marbles and doing something stupid and desperate — like starting another merry little war.

Sure this bad guys suffer....along with the rest of us. We’ve always been in this together, like it or not. Too bad we (collectively) never seemed to grasp that fundamental fact nor found an enlightened understanding of the reciprocal nature of our interdependence with the rest of the natural world to inform our choice of human endeavors.