For a closer look, take a look at Italy. Oil and gas consumption peaked in 2004 and has been on a decline ever since. According to Ugo Bardi over at Resource Crisis, "Italy is in full collapse." One not only sees that industries are closing down, but also that restaurants are popping up in the attempt to attract the wallets of globe-trotting, placeless tourists, along with all the chic restaurant-hoppers. What is being witnessed, says Bardi, is "unreal."
Unfortunately, and much like the aforementioned countries, if one is looking for solid explanations about these economic collapses from mainstream news sources, then one is pretty much SOL. As Bardi then explains,
When the crisis is mentioned, different culprits periodically appear in the first pages of the newspapers: the Euro, the European Union, politicians, immigrants, government employees, bureaucracy, lazy workers, terrorism, femicide, Angela Merkel, Vladimir Putin, Silvio Berlusconi, and more. It is a cycle that never stops, it keeps turning, every time pointing at something - new or old - that the government will target to solve the crisis once and for all.In turn, not only could low-priced oil ($20!?) usher in another Great Recession via a meltdown of the oil market, but the newly enshrined oil ventures are at serious risk of collapse, and whose bubble bursting could be akin to the recent housing bubble. (To be fair, I can't imagine oil reaching that low if not staying there for very long, for the very simple reason that any number of unfortunate conflicts around the world could cause its price to increase overnight.)
In short, many of the unconventional sources of oil require $100 prices in order to remain financially viable (or at least give that impression). Since many of the fracking plays in the United States are owned by independents who don't have the financial reserves to weather a prolonged period of prices below costs of production, things could get hairy.
Furthermore, since fracking is capital-intensive, drillers have borrowed ridiculous amounts of money in order to acquire leases, drill wells, as well as purchase and install processing equipment and infrastructure. And since fracked wells have both steep production increase levels and decrease levels, drillers have been forced to continually drill more and more wells to keep up the semblance of growth -- and to keep the debt piling up. What's resulted is a junk bond market possibly akin to what was witnessed a few years back with the housing fracas.
And not to let all the boosters off the hook, for it was once again an all-too-giddy media that kept itself busy cheering on the latest (fraudulent?) money-making scheme, pumping up all the debt with nary a peep about any possible consequences.
And so what's going on now that prices have crashed? That would be sellers panicking to unload their energy-related junk bonds and other investments in unconventional oil and related industries, and it's anybody's guess as to how much of a collapse will occur in these fields -- and if it's significant enough, if they'll even have a chance to recover.
And as mentioned earlier, a round of offer destruction is expected to kick in after a round of demand destruction. For instance, nearly 40% of the jobs created since 2009 in the United States have been in energy related fields, those being some of the higher paying jobs in the nation, a catastrophe to the U.S. economy if lost.
As John Michael Greer recently put it over at The Archdruid Report, "If I'm right, the spike in domestic US oil production due to fracking was never more than an artifact of fiscal irresponsibility in the first place, and could not have been sustained no matter what."
What we might be about to find out is how vulnerable the United States' shale boom is to low prices, and how profitable fracking actually is.
Regardless, what happens next is anybody's guess, and it would be a fool's game to try and give any predictions. Nonetheless, it's worth quoting Terry Lynn Karl from a recent conversation with Andrew Nikiforuk. "We are in a situation where oil supply limits can cause recessions and oil supply gluts can cause stock market failures."
The reasons to get off oil seem to be piling up.
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Re-posted from the article at culturechange.org The original article appeared on Allan's website fromfilmerstofarmers.com.
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