The End of the Fracking Ponzi Scheme

[planosteve]

OPEC's contentious decision to keep its production target, leaving the market with a supply glut, could trigger a wave of debt defaults by U.S. shale oil producers, warn analysts.

The 12-member oil cartel on Thursday said it would stick to its output target of 30 million barrels a day, triggering a sharp decline in oil prices, with U.S. crude futures tumbling nearly $6 to $67.75 on Friday - the lowest since May 2010.

Neil Beveridge, senior oil analyst at Sanford C. Bernstein, told CNBC the plunge in oil prices raises the risk of bankruptcy for U.S. shale players.

"While production growth is very strong [in North America], remember if you look at the debt situation for a lot of these companies, there is a lot of distressed debt," said Beveridge.

"$68 a barrel is not economical for a lot of these shale oil wells. CDS [credit default swap] spreads and yields on some of the debt are rising very quickly, because at these kinds of oil prices you are going to see producers go bankrupt," he added.

http://www.cnbc.com/id/102222911

[John in Plano]

The first experiment in fracking happen in Kansas in 1947 and with in a couple years was being implemented in the oil patch.

60+ years of use in a cyclical industry does not equal a Ponzi scheme

[planosteve]

The first experiment in fracking happen in Kansas in 1947 and with in a couple years was being implemented in the oil patch.

60+ years of use in a cyclical industry does not equal a Ponzi scheme

It is old technology that was almost never used until the oil price skyrocketed. It wasn't economical.

[GFB]

I think what you're seeing is..the beginning of the end of OPEC.

Although we use more and more oil every year.

..Oil imports to the U.S. are dropping more and more each year.

[planosteve]

The price of oil is deflating. Deflation is a bad thing for the economy according to the FED. Why isn't everyone complaining about the horrible deflation?

[GFB]

The price of oil is deflating. Deflation is a bad thing for the economy according to the FED. Why isn't everyone complaining about the horrible deflation?

When the economy deflates, things are going bad.

When prices drop for one commodity because of supply and demand..that's Capitalism.

And you and Mark are getting a lesson on why fossil fuels are not the best thing to watch when one wants to watch inflation.

[planosteve]

The price of oil is deflating. Deflation is a bad thing for the economy according to the FED. Why isn't everyone complaining about the horrible deflation?

When the economy deflates, things are going bad.

When prices drop for one commodity because of supply and demand..that's Capitalism.

And you and Mark are getting a lesson on why fossil fuels are not the best thing to watch when one wants to watch inflation.

If the price of energy goes down it benefits everyone because everyone uses energy. If the "economy" deflates while everyone benefits, why is that a bad thing? The economy doesn't even exist, it's just a concept.

[GFB]

The price of oil is deflating. Deflation is a bad thing for the economy according to the FED. Why isn't everyone complaining about the horrible deflation?

When the economy deflates, things are going bad.

When prices drop for one commodity because of supply and demand..that's Capitalism.

And you and Mark are getting a lesson on why fossil fuels are not the best thing to watch when one wants to watch inflation.

If the price of energy goes down it benefits everyone because everyone uses energy. If the "economy" deflates while everyone benefits, why is that a bad thing? The economy doesn't even exist, it's just a concept.

Well, a protracted deflation of the "concept" would cause a spiraling down leading to something as bad or possibly far worse than the Great Depression.

[GFB]

You guys are right to worry about a collapsing economy..you've just got it backwards as to how it happens.

[planosteve]

Well, a protracted deflation of the "concept" would cause a spiraling down leading to something as bad or possibly far worse than the Great Depression.

To say that lowering energy prices which benefits everyone in the economy is bad for the economy......is total BS. It would lead to lower prices on most goods and services produced domesticly which is also a good thing. Depressions and recessions, every one, are the result of bubbles collapsing which were caused by excess fiat money creation and credit expansion, not by lowering prices.

[GFB]

To say that lowering energy prices which benefits everyone in the economy is bad for the economy......is total BS. .

That's what I told YOU..you knucklehead.

[planosteve]

When the economy deflates, things are going bad.

The head of the German Central Bank says you are wrong. He says a the drop in energy prices is actually like an economic stimulus program for the economy.

During a panel discussion, Mr. Weidmann declined to give a guideline on the European Central Bank’s monetary policy plans, but said that the current decline in oil prices, which have fallen by more than 30% since the summer, helps to stimulate the economy.

“The price development is currently strongly marked by energy prices,” he said. “A stimulating effect comes from energy prices. It’s almost a small stimulus program.”

http://online.wsj.com/articles/bundesbanks-weidmann-rejects-calls-for-german-stimulus-plan-1417177202

[GFB]

When the economy deflates, things are going bad.

The head of the German Central Bank says you are wrong. He says a the drop in energy prices is actually like an economic stimulus program for the economy.

During a panel discussion, Mr. Weidmann declined to give a guideline on the European Central Bank’s monetary policy plans, but said that the current decline in oil prices, which have fallen by more than 30% since the summer, helps to stimulate the economy.

“The price development is currently strongly marked by energy prices,” he said. “A stimulating effect comes from energy prices. It’s almost a small stimulus program.”

http://online.wsj.com/articles/bundesbanks-weidmann-rejects-calls-for-german-stimulus-plan-1417177202

"He says a the drop in energy prices is actually like an economic stimulus program for the economy."

That is a true statement..if also acts the same way a tax cut works for the economy.

Did you mean to argue with someone else?

[GFB]

I don't know whether you're doing it on purpose, or it's time for your medicine..but you are superimposing my answers to..deflation in the economy..with..a dropping of fuel prices from an increased supply.

They have nothing to do with each other.

[jellowrestling]

To say that lowering energy prices which benefits everyone in the economy is bad for the economy......is total BS. .

That's what I told YOU..you knucklehead.

Sometimes it helps to take crazy pills when talking economics with certain people, just to get on the right wavelength.

[planosteve]

Sometimes it helps to take crazy pills when talking economics with certain people, just to get on the right wavelength.

When talking economics, it helps to know something about it.

[GFB]

Sometimes it helps to take crazy pills when talking economics with certain people, just to get on the right wavelength.

When talking economics, it helps to know something about it.

In a post above, you said there is no such thing as the "economy."

If the economy doesn't exist, there is no such thing as "economics."

[planosteve]

Sometimes it helps to take crazy pills when talking economics with certain people, just to get on the right wavelength.

When talking economics, it helps to know something about it.

In a post above, you said there is no such thing as the "economy."

If the economy doesn't exist, there is no such thing as "economics."

I guess we have to go back to basic logic.
The "economy" is a concept. A concept is not something that exists. It is a theory about the relationship of things that exist.

[GFB]

Was that your Deepak Chopra?

[planosteve]

Shale producers literally got crushed in the market today loosing 25-30%. It's going to be a bloodbath for those foolish enough to have invested in the fracking Ponzi scheme. Especially, some of the major banks.
http://www.marketwatch.com/story/10-us-shale-oil-stocks-getting-crushed-the-most-today-2014-11-28?siteid=yhoof2