The article linked discusses some of the financial ramifications as oil and gas companies go bankrupt, banks/investors suffer losses, stockholders loss value;
Oil and gas companies borrowed heavily when oil prices were soaring above $70 a barrel. But in the past 24 months, they've seen their values and cash flows erode ferociously as oil prices plunge — and that's made it hard for some to pay back that debt.
This could lead to a massive credit crunch like the one we saw in 2008. With our economy just getting back on its feet from the global 2008 financial crisis, timing could not be worse, especially in an election year. It makes you wonder: How could this happen again? Quite easily, as it turns out.
There are more issues that the article doesn't cover. In the major drilling areas of W Pa and NE Pa, restaurants and hotels are reporting a 35% drop in business. Tax revenue is down. Job losses in the US could total a couple hundred thousand. Many of these workers bought houses and may lose them. And its not just oil field workers as law firms are laying off or closing offices, steel plants/pipe mills shut down, trucking companies, suppliers of sand, heavy equipment, tools, uniforms, and more are all laying off people.
Internationally, governments that rely on oil revenues are in danger of collapse. Venezuela, Iraq, Nigeria, Liberia, Libya and others all all hurting as are North Sea/Scandinavian countries(although these aren't in danger of collapse).
And with other issues like massive global debt it could spell serious trouble. For a scary look, read this CNBC article. which predicts a major recession worse than the 2008 one we just had.
Not sayin' its gonna happen, just pointing out the possibilities. The problem is that the price of oil/nat gas fell too fast for the industry to make adjustments. Enjoy the $2 gas but keep an eye open to future srtresses.
Oil and gas companies borrowed heavily when oil prices were soaring above $70 a barrel. But in the past 24 months, they've seen their values and cash flows erode ferociously as oil prices plunge — and that's made it hard for some to pay back that debt.
This could lead to a massive credit crunch like the one we saw in 2008. With our economy just getting back on its feet from the global 2008 financial crisis, timing could not be worse, especially in an election year. It makes you wonder: How could this happen again? Quite easily, as it turns out.
There are more issues that the article doesn't cover. In the major drilling areas of W Pa and NE Pa, restaurants and hotels are reporting a 35% drop in business. Tax revenue is down. Job losses in the US could total a couple hundred thousand. Many of these workers bought houses and may lose them. And its not just oil field workers as law firms are laying off or closing offices, steel plants/pipe mills shut down, trucking companies, suppliers of sand, heavy equipment, tools, uniforms, and more are all laying off people.
Internationally, governments that rely on oil revenues are in danger of collapse. Venezuela, Iraq, Nigeria, Liberia, Libya and others all all hurting as are North Sea/Scandinavian countries(although these aren't in danger of collapse).
And with other issues like massive global debt it could spell serious trouble. For a scary look, read this CNBC article. which predicts a major recession worse than the 2008 one we just had.
Not sayin' its gonna happen, just pointing out the possibilities. The problem is that the price of oil/nat gas fell too fast for the industry to make adjustments. Enjoy the $2 gas but keep an eye open to future srtresses.
