So the US stock market – and most of the other major world stock indices – have been tanking lately. Part of the reason given is the low price of crude oil, at a time of oversupply and the added stress of Iranian oil entering the market.
Middle Eastern oil is cheap to produce and can still make money at $27/barrel.
US oil, especially shale oil, can not. Production costs can be double that amount, so, as one would expect, there has been a huge drop in the number of new wells being drilled.
To make matters worse, the companies were borrowing the money to drill wells, betting they could make enough profit to pay make loan payments and keep drilling.
Some economists and fossil fuel sector experts, such as Art Berman and Deborah Lawrence, had warned of a “shale bubble” which could burst, causing a wave of bankruptcies in the drilling sector and massive troubles for the banks loaning to them.
Their predictions are coming true.
We can’t say we weren’t warned.
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