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The Forum > Article Comments > Could falling oil prices spark a financial crisis? > Comments

Could falling oil prices spark a financial crisis? : Comments

By Nicholas Cunningham, published 8/12/2014

Hundreds of billions of dollars have also come from junk-bond investors looking for high returns.

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The finance scenario that the writer outlines has already taken effect.
The number of lease drilling approvals for fracking sites has fallen
by 40% from October to November.
Because drilling has to be continuous to keep production level then a
decline in tight oil production of 40% is inevitable.
That of course implies no further reduction in drilling in December.

As many said the fracking drilling always was a Ponzi scheme.
Posted by Bazz, Monday, 8 December 2014 9:46:34 AM
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The warmist/alarmist/coolist taught me at school that there would be no oil left by 2000. Like economist they have not a clue.
Posted by runner, Monday, 8 December 2014 10:17:13 AM
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Nope! Usually the other way round!
Rhrosty.
Posted by Rhrosty, Monday, 8 December 2014 11:45:43 AM
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The impact on energy investors is just one aspect of the fall in oil price and its effect on energy prices in general. As Christine Lagarde of the IMF has pointed out, lower energy prices have the nett effect of raising GDP. This is a consequence of the multiplier effect that energy has on human productivity. So one could easily imagine that lower energy prices could trigger a burst in economic growth and the positive consequences that could flow from that. So it's not all gloom and doom, though obviously there will be some losers.
Posted by Tombee, Monday, 8 December 2014 12:37:44 PM
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This bloke really does sound like Hanrahan. If oil prices go up "We'll all be rooned". If they go down, "We'll all be rooned". If they find too much shale oil, "We'll all be rooned", but if they stop drilling shale oil, "We'll all be rooned".

It really is Nicholas, time to make up your mind. Trying to have it all ways, because you don't like oil, makes you little better than a boy crying wolf.
Posted by Hasbeen, Monday, 8 December 2014 2:55:32 PM
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Runner, well actually it was 2005, but tight oil obscured the peak.
So as tight oil declines it will reveal the conventional oil position.
The fall in price has been caused by a decline in demand in the OECD countries.

Hasbeen, actually he might be right, we will will be "rooned" no matter what happens.
Read an article the other day about how the "developing countries"
will not become like the "developed countries" but rather the "developed counteries"
will become like the "developing countries" !
That might cheer you up !

I know you are skeptical about alternative energy systems and it seems
that you are spot on. It appears tht the ERoEI of solar and wind
systems is around 5 so that it is impossible for an energy system at
that level to either construct itself or probably even maintain itself.
Posted by Bazz, Monday, 8 December 2014 3:34:22 PM
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Bazz I have no doubt we are headed that way. If we don't damn soon get over our aversion to nuclear energy, we will have a hell of a lag to catch up, but not in my lifetime I don't think.

I don't see much problem with a few Yank junk bond buyers losing their shirts. Those losses, if realised, will have put T-shirts on a lot of workers backs, & their kids backs along the way. Money, like energy, is not destroyed, it just changes which bank account it appears in.

What ever the long term outcome, it has certainly reduced my fuel bill considerably, & if it means some Arabs have to drive silver plated, rather than gold plated Ferraris, I really don't care.

Besides all we need is for someone to invent a better vacuum cleaner, & we can start sucking up all that methane clathrate on the bottom of the deep ocean, & shoving it in our car's fuel tanks. That may be the next way to skin the cat.
Posted by Hasbeen, Monday, 8 December 2014 4:12:17 PM
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I am on unfamiliar territory in praying to the multiple-faith God in hoping, nay pleading, that low oil prices:

1. impoverish the undeserving Arab oil monarchies,

2. that these oil monarchies run out of money they spend to finance Islamic terrorism around the world, and

3. oil actually costs less for the Aussie consumer .

Yours

Planta
Posted by plantagenet, Monday, 8 December 2014 5:01:13 PM
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Hasbeen,
Yes, considering the poor ERoEI of the existing systems at
present there are only two alternatives available that can do the job.
Nuclear and Geothermal (if they can get it going).

There really is nothing else.
What makes it frightening is the total disconnect of the political class.
I saw Shorten babbling on Growth, Growth, Growth.
Joe Hockey says GRowth is the way !

Haven't either of these pollies got the message yet ?
The "End of Growth is neigh" !

I wonder what they think has happened in Europe ?

We have seen the start of it and although if we are extraordinarily
lucky it might not have much effect in our lifetime our children will
really be impacted as their super goes nowhere.
Our grandchildren will be condemned to be renters of Chinese property .
Actually I think there will be a dramatic effect during the next 10 years.
All this while the moslems conduct their civil war with the Chinese.

Oh well, will they never learn ?
Posted by Bazz, Monday, 8 December 2014 5:04:26 PM
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Whoops, in the first post on this thread I reported that the drilling
lease approvals from October to November fell 40%.
I have just read a report that the drilling rig count has remained steady
over that same period.
I don't know how far ahead lease permits are of actual drilling but it
might mean the 40% was not accurate.
If there are dramatic changes, will put another post on here.
Posted by Bazz, Tuesday, 9 December 2014 12:08:01 PM
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