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Oil Rout Continues as “New Texas Oil” Gains

from Outsider Club:

It is still not time to invest in oil. That knife is still falling.

Consider the most recent Baker Hughes rig count, published this week. Another 30 rigs were taken offline in the previous week.

And the rig count has been falling like a stone for over a year now.

In late 2014 — as I was shouting from the top of my lungs that we were in a shale bubble — the U.S. rig count stood at 1,609 rigs.

Today, that stands at just 467 rigs, a reduction of more than 70%.

But that’s still not enough to bring equilibrium to the oil market.

As I told you earlier this week, Iraq is pumping at a record. Saudi Arabia has opened up the spigots. Iran is pumping oil into the world market for the first time in four years.

And they won’t stop until American shale fields are littered with corporate corpses. There have only been ~50 bankruptcies so far. We can start the bottom talk when that number climbs to the hundreds.

Not only that.

U.S. demand for refined petroleum products fell 3.9% in January 2016 from the previous month. So the market is flooded with oil (inventories are literally hitting new highs) at the same time the market is demanding less of it.

The demand picture doesn’t look like it’s going to improve in the near-term, either. The emerging markets and Europe are a mess, and EIA cut its 2016 and 2017 demand forecasts just this week.

And in a double-whammy to the economy, the shale bust has taken 100,000 jobs with it as well — over 15% of the oil workforce peak in 2014. That doesn’t even include “all the other job losses in the supply chain,” according to Reuters. From 10,000 railroad industry layoffs to steel workers making oil pipe, Reuters notes:

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3 comments to Oil Rout Continues as “New Texas Oil” Gains

  • Craig Escaped Detroit

    Get em while the getting is still good.

    SOLAR SOLAR SOLAR panels. Since MOST are made in Asia, and the crash will likely shut down a lot of world trade (and the petro dollar will be the POOPY dollar), you’d better get all the stuff you need before you need it.

    And if (or when) the grid will be GONE, if not for you, then certainly for other areas, those solar panels will become SUPER DOOPER valuable to people who would like to have some electricity.

    I’m not talking about 3-5 panels. (500-1200 watts)

    I’m saying to purchase MORE than 6000 watts of panels (this CAN be enough to power an entire home as long as you don’t have electric stove & water heater, or electric heat.)

    For winter heating, if you’ve got a very efficient HEAT pump, (and plenty of battery power storage), you MAY be able to heat your home too. (but those cloudy days will really freeze your buns off even if you’ve got extra solar panels.

    For the cost of 1000 ounces of silver, a family can have a complete SOLAR powered house.

    You’ll not be losing a single PENNY of your money, because your home value will be worth the extra value, and you may never pay another utility bill for the next 20-50 years. (yes, of course some repairs are to be expected. Same as when you buy a car, you still gotta do some repairs to keep it going.)

    Articles I have read, explained how the money you pay for a solar system, gives you a “ROI” (return on investment) equal to 7% or even 8% on your money.

    Where in the hell can you get a solid 7% return (interest) on your money today? and it’s TAX FREE (because the money you SAVE on your bills, is NOT INCOME.)

    So why in the hell would anybody leave money in stocks, bonds, IRA’s, 401, cash, etc, when they could SPEND that money on something that gives them equivalent of 7% tax free money, and it belongs to you, you can go outside touch, feel and look at your investment as it saves you money.

    Even when you sell your home, it will be worth MORE money. You’ll recoup some or all of your investment.

    I’ll bet, you could even make an LLC corp., list your solar panels as an electric company, etc, and perhaps even WRITE off the costs as DEPRECIATION? I have NO idea how that might or might NOT work, but there MAY be extra ways of making it pay off quicker.

    • Ed_B

      “I’ll bet, you could even make an LLC corp., list your solar panels as an electric company, etc, and perhaps even WRITE off the costs as DEPRECIATION? I have NO idea how that might or might NOT work, but there MAY be extra ways of making it pay off quicker.”

      I’m not a tax guy but my bet on this is that you would have to be making a profit on your solar installation in order to deduct any of it. Selling power back to the grid should qualify but the deduction likely would limited to some percentage of the income derived from it. Would like to hear from a tax pro on this if any of you folks are reading this.

      Solar works well in many parts of the US. Not so great in Western Washington state where I live but still not all that bad. It can work well in a small off the grid house if it is not shaded and the orientation is good for panel exposure to long periods of sun.

      My biggest concern would be moving and leaving the solar system behind. Yes, some of its cost will likely be recovered when the house is sold but it would suck to go through all the time, trouble, and expense just to do that all over again at the next place. If I knew that I would not be moving, it would be a lot more tempting. 🙂

      The coolest thing I can think of with solar would be to design a house from the ground up to be solar powered and very efficient, so all lights would be low-power high-output LEDs, etc. Avoiding large heavy duty electrical appliances that heat or cool would be good. A couple of fans that circulate the air can provide some cooling without the high power draw of an A/C system. A small propane stove can be used as a back-up or booster to the wood stove and oil lamps could back up the lights.

      Around here, wood is a decent heating fuel for anyone with a wood-burning stove. This can also heat water. One of those solar black tube water heaters can work well too if one can prevent it from freezing and breaking its parts during the winter. Adding anti-freeze solution to the heated water system should prevent that but a heat exchanger would be needed to heat the water that would be used for showers, dish washing, laundry, etc.

      It’s not difficult to eliminate a lot of power waste if only one thinks about it for a while and can live with some compromises to save a lot of energy.

      We do what we can to save power here by keeping our heat at 65-66F (60-62F at night) in the winter and cooling at 74-75F (off at night) in the summer. We do have a heat pump and we do use fans for a cheaper cooling effect. Our house has a basement, which is full of cool air in the mornings, so in the summer time I will turn on the summer fan between 9-10 AM, which cycles the furnace fan on and off every 15-20 minutes. It moves air without heating it. This brings cool air up from the basement and delays / reduces the amount of time that the A/C is needed on hot days.

      One can do the same for reducing water usage if they just put their mind to it. Not that this is a big problem around here. lol

      • Craig Escaped Detroit

        I’ve looked into the “scam” of selling excess power back to the grid and it sucks. (at least in my state as well as many others).

        When I buy power, I pay 10c/kw-hr, and they heap taxes, fees, delivery charges onto it, but when I sell power to them, they pay only the wholesale price without all the other crap onto it, so they only have to give me about 3-4 cents per kw-hr.

        I’d be better off, running a wire (and put a meter on it) and sell power to my neighbor for a bit less than he pays the grid.)

        It was explained to me (by that same neighbor who used to manage a trailer park), that it was legal for that trailer park, to bring grid power into the park, and then RE-DISTRIBUTE it (with their own meters on each trailer site), and charge their own rates to the homeowners.

        The trailer park owner was legally allowed to act as their own power grid company.
        =================

        The rainy NW USA is gorgeous, but can be extremely rainy. But, the solar panels that USED to cost $6,000 / 1kw , now is available for about $800-$1,100 per 1kw. Wow.
        =============

        You are right that it would be an emotional drag to set it all up, and sell the homestead and lose it.

        I have thought about, it could be workable and useful to make a healthy sized solar setup, on a trailer. Something like a long, car hauler flatbed, with a raised rack frame, that frame could even be hinged to arrange the best sun-angle. The trailer would hold all the batteries, and still have space to be used as a storage trailer for other things.

        Being on a trailer, NO jurisdiction would be able to put any HOME ASSESSMENT taxes on it. (many areas, tax solar as a home improvement, but other places don’t allow you to put any kind of trailer in your back yard either.)

        A 16ft-18ft long trailer, will hold up to about 2000 watts of panels (and you could add a few more on moveable side wings). No more worries about leaving it behind. A “BUG OUT” solar trailer.

        Just make sure you REMOVE the wheels (and put some big lock block on the tongue) to prevent thieves. Chain it down, etc. Such a trailer will be worth a lot of value when the grid is gone.

        Are you familiar with a DRY WALL HOIST ? Something like that would be a good idea to design a larger telescoping solar rack. Just dreaming out loud. Even a stationary solar rack, could be made to raise up higher, something similar to an 18 wheeler’s car hauler upper deck with hydraulic up/down.

        Or a “Crank Up” ham radio tower. That would be an interesting system for a wind tower but for all the top weight and wind stresses.

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