The Oil Industry Is Dying Right Now. Don't Resuscitate It.

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    • #308317
      eridani
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      • Total Posts: 5,741

      https://readersupportednews.org/opinion2/277-75/62597-focus-the-oil-industry-is-dying-right-now-dont-resuscitate-it

      The financialization of the economy is predicated on real-world assets that are used for real-world things, like oil for providing energy, being traded on financial markets for speculative investors to make a profit. Usually, this passing around happens on a computer, with the owner of however many barrels of oil never having to deal with them as physical entities. This dramatic oil price drop happened because traders realized that the collapse in demand meant they may actually have to receive and store the asset. I suspect that trading companies like Barclays and Citigroup don’t have abundant oil barrel storage space in the basement of their headquarters.

      Just as the Great Recession of 2008 was instigated by financial markets being impacted by pesky real-world events — in that case, people defaulting on their mortgages — here we see that shocks to the real economy will be passed on to the financial sector. The COVID-19 pandemic has forced large sections of the economy to grind to a halt, such that we need less oil than usual due to reduced transport and production.

      But this crisis isn’t just a momentary blip. Goldman Sachs has said that the oil market remains “massively oversupplied” and that that will continue to push prices down. Howie Lee, an economist at the OCBC Bank in Singapore, suggested that the lack of storage for oil won’t improve based on current conditions. Both agree with ING Economics’s analysis that a further fall in prices can only be avoided with either a reduction in supply (if the US cuts oil production) or a boost in demand (getting the economy running again). In practice, this means a planned contraction of the oil industry in line with the wider economy.

      The real question is, what happens after this contraction? As a consequence of fossil fuels, the impacts of climate breakdown are already becoming more frequent, severe, and geographically spread to new places. More and more, we will see extreme weather events, flooding, and drought disrupt business as usual around the world. Cyclone Idai destroyed 90 percent of the city of Beira when it ripped through Mozambique in 2019. Though the details are different from COVID-19, economies can no longer rely on long stretches of relatively undisturbed “normality.” That’s why crises have to provide us with opportunities to rethink how society operates — and no sector is more urgent in this regard than energy production.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

    • #308399
      Sorechasm
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      According to it’s director Jeff Gibbs. If we could learn the lessons of this article, Mother Earth may allow us to roam free again, and walk away from our current pandemic. Though economically shattering, it is a mild shock compared to the disasters coming as the result of climate change, unless we learn our lesson. If the life blood of our economy is the petro-dollar (which appears logical since we spent $5T on ME wars to protect it, while we won’t spend $1500 on one desperate American), then why shouldn’t the federal government take over the oil industry?

      “Go and tell Alexander that God the Supreme King is never the Author of insolent wrong, but is the Creator of light, of peace, of life, of water, of the body of man and of souls;...what Alexander offers and the gifts he promises are things to me utterly useless;..." Dandamis, a great sannyasi of Taxila.Excerpt From: Yogananda, Paramahansa. “Autobiography of a Yogi.”

    • #309084
      eridani
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      • Total Posts: 5,741

      https://www.commondreams.org/views/2020/04/27/covid-19-fallout-threatens-long-term-survivability-big-oil

      The Financial Times adds that coronavirus has now forced the oil companies to “make trade-offs unthinkable just two months ago as they slash capital spending and operational costs, suspend share buyback programmes, delay project approvals, issue debt and secure new credit lines. Most majors until now have pulled out the stops to preserve their dividend—but Norway’s Equinor on Thursday became the first to cut its payouts.”

      All the other companies face the same conundrum—keep their staff happy and employed, or keep their investors happy by giving big dividends. Increasingly, the industry will not be able to do both.

      As the FT points out: “Industry executives say the biggest companies may face the dilemma of which to cut first—jobs or dividends—In a depressed market, the biggest western majors will struggle to earn enough to meet their dividend targets.”

      If the companies cannot pay their dividends they risk losing the confidence of investors already under intense pressure from the climate divestment movement. To many investors and shareholders the dividend is everything. As one investor website says, the dividend “is the last bond of trust between the sector and investors.”

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

    • #309544
      eridani
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      • Total Posts: 5,741

      https://www.commondreams.org/views/2020/04/28/beginning-end-oil

      Among the first and most dramatic of these has been a shockingly deep decline in flying, automobile commuting, and leisure travel — activities that account for a large share of daily petroleum use. Airline travel in the United States, for example, is down by 95% from a year ago. At the same time, the personal consumption of electricity for telework, distance learning, group conversations, and entertainment has soared. In hard-hit Italy, for instance, Microsoft reports that the use of its cloud services for team meetings — a voracious consumer of electricity — has increased by 775%.

      These are all meant to be temporary responses to the pandemic. As government officials and their scientific advisers begin to talk about returning to some semblance of “normalcy,” however, it’s becoming increasingly clear that many such pandemic-related practices will persist in some fashion for a long time to come and, in some cases, may prove permanent. Social distancing is likely to remain the norm in public spaces for many months, if not years, curtailing attendance at theme parks and major sports events that also typically involve lots of driving. Many of us are also becoming more accustomed to working from home and may be in no rush to resume a harried 30-, 60-, or 90-minute commute to work each day. Some colleges and universities, already under financial pressure of various sorts, may abandon in-person classes for many subjects and rely far more on distance learning.

      This and other recent data suggest that any notion China, India, and other developing nations will soon resume their upward oil-consumption trajectory and save the global petroleum industry appears wildly far-fetched. Indeed, on April 17th, China’s National Bureau of Statistics reported that the country’s GDP shrank by 6.8% in the first three months of 2020, the first such decline in 40 years and a staggering blow to that country’s growth model. Even though government officials are slowly opening factories and other key businesses again, most observers believe that spurring significant growth will prove exceedingly difficult given that Chinese consumers, traumatized by the pandemic and accompanying lockdown measures, seem loath to make new purchases or engage in travel, tourism, and the like.

      And keep in mind that a slowdown in China will have staggering consequences for the economies of numerous other developing nations that rely on that country’s tourism or its imports of their oil, copper, iron ore, and other raw materials. China, after all, is the leading destination for the exports of many Asian, African, and Latin American countries. With Chinese factories closed or operating at a reduced tempo, the demand for their products has already plummeted, causing widespread economic hardship for their populations.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

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