Behind The News

There is always something hidden behind every news headline.  Take this one for instance: Prolonged oil slump sparks second wave of cuts to 2016 budgets  And it is only early February.

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy NicholsonPhoto credit: A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. Reuters/Lucy Nicholson

It has been over a year now, that oil companies have been closing down wells, selling assets (mostly mining rights and drill rigs), cutting down on spending (mostly labour and exploration), and buying their own shares in order to be able to keep paying share dividends, while pumping for all they are worth for a number of sick, twisted and sadistic reasons (which only marginally have anything to do with their bottom line and retention of market share).  They must by now be reduced to being only the barest of shells. Skeletons.  Walking dead.  Waiting in forlorn hope for relief in the form of price hikes.

Well, they have at least another year of waiting to get through, those few of them who actually make it that far.

Even then, assuming that the huge reserves in storage on land and in a vast flotilla of idle tanker ships, has been drastically reduced and demand has started to rise, both of which would be necessary to engender any sufficient form of price increase that might trigger the need for fresh investment in the industry, how many of the remaining corporate corpses or state-funded zombie mining companies will be able to drag themselves off the ground into functioning business units again?  Few if any, I would suggest.

And those that do:

  • Where are they going to drill, having sold their mining leases?
  • And where are they going to find the knowledgeable staff and mining equipment to do the drilling?
  • And how long will it take to restart long-closed wells, even if they can be restarted?
  • And how long before enough oil starts to flow through to an economy, dead on its feet, if it has any signs of life at all?

I suggest there will be no Second Chance Saloon opening up in the future on the ashes of the current Last Chance Saloon which is already putting up its shutters as the final curtain for our oil based society starts to fall on an otherwise empty stage this year.

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