Wall Street's Capital Discipline is why US oil production won't ramp up at $100 (opens in new tab)

(governance.fyi)

3 pointsdaveland22d ago5 comments

5 comments

It's easy, why investing into production if oil price spike is caused by a single, temporary event, not something structural? That money will be lost if invested in production because it means producing crude with high marginal cost (or it will be already produced today), which will by definition become unprofitable when prices fall back. There is no moral dimension here.

davelandOP22d ago

All events are temporary, but if oil prices skyrocket, the rest of the economy will suffer long-term damage and increase the chance of higher interest rates for everyone

anovikov22d ago

It's also timing. Before new production hits the market in 3-6 months, prices will fall again, and they will be holding a massive bag.

anovikov22d ago

Why?! If oil price skyrockets, US just becomes richer. It's not what it was in 2008. US is the world's largest oil producers by far and one of the largest net exporters. So economy wins one way or the other, or petrostates won't be rich. Higher oil prices means money flowing in, not out.

Psychological/political consequencies of higher nominal sticker price of gas can be negative, but this is Trump's problem, not anyone else's.

davelandOP22d ago

OG Title : Wall Street Killed the Wildcatters: $100+ Oil Now Means Bigger Buybacks With Fewer Jobs and Babies Than Ever Before

j / k navigate · click thread line to collapse

5 comments

anovikov22d ago

davelandOP22d ago

All events are temporary, but if oil prices skyrocket, the rest of the economy will suffer long-term damage and increase the chance of higher interest rates for everyone

anovikov22d ago

It's also timing. Before new production hits the market in 3-6 months, prices will fall again, and they will be holding a massive bag.

anovikov22d ago

Psychological/political consequencies of higher nominal sticker price of gas can be negative, but this is Trump's problem, not anyone else's.

davelandOP22d ago

OG Title : Wall Street Killed the Wildcatters: $100+ Oil Now Means Bigger Buybacks With Fewer Jobs and Babies Than Ever Before

j / k navigate · click thread line to collapse