42 AMERICAN Oil Companies File for BANKRUPTCY 2016 Oil Crash Has Banks Running Scared

From the Link to the CNN Money article that your source referenced:

Still, Dimon said the energy portfolio makes up just a small portion of JPMorgan's balance sheet and many of the loans are backed by physical assets. That means banks can sell off assets to recover money if a company defaults on its loans.

"We're not worried about the big oil companies. These are mostly the smaller ones that you're talking," Dimon said.

Paul Miller, a banking analyst at FBR, said oil loans don't represent nearly the same threat to banks that mortgages did last decade. He also pointed out that banks have been forced to stockpile capital to help them absorb losses.

"The big banks might have 1% to 6% of exposure. That's not going to kill them. This is not like 2006 or 2007," Miller said.

So, I think stirring up a frenzy of this is not only short sighted but stems from a lack of understanding the oil industry.

a reply to: Phage

Do you mean Cheap prices fail to kill U.S. oil boom then yes?

a reply to: machineintelligence
Well, since that is today, yes, that's what I mean.

Soundtrack suggestion :

a reply to: machineintelligence

This is all expected, interventionist pumped overvaluations and chaotic investment rearrangements put ever increasing proportions of wealth into the tipping cauldron.

We must not "bail out" anyone. Let the chips fall where they may and we can begin to rebuild.

A silver lining in all of this would be that most "evil" oil companies will go bankrupt and release their misallocated capital resources back into the market environment where it can do the current bidding of consumers.

Those of us who argue for a market economy here will no more be obliged to defend giant oil. If we let them sink or swim they can stand on their own merits unsupported by protectionist regulatory structures.

However, if we deal with this in the conventional interventionist way, we will bail out a handful of select preferred companies creating an enhanced oligopoly (I hate that word as it is misused so prolifically but, it is appropriate in this context). Perhaps even a nationalization is in the air with the stench of socialist confiscatory managementism that pervades our economic corridors. Cartelization is upon us if we try to intervene, we must stand down.

a reply to: greencmp

Great post, I'd say that Cartelization started way back when with Standard Oil though.

originally posted by: twitchy
a reply to: greencmp

Great post, I'd say that Cartelization started way back when with Standard Oil though.

Yes, I am mostly trying to make a direct comparison to real estate banking and its "bail out" fiasco which resulted in fewer more powerful banks. It is an unavoidable truism associated with centralization.

The existing companies over our history did buy the legislation they needed to leverage state power over their private business environments producing policies hostile to competition. That cronyism is alive and well and is the cartelization that you refer to I think.

What I fear now is more centralization, potentially to the point of nationalization. I wouldn't put it past a Sanders administration.

originally posted by: machineintelligence

The big banks are seriously exposed to loans to oil companies. The oil industry is taking down the biggest banks. It is like we are in the middle of a huge war and the resource providers are beating the crap out of the big banks. Not sure where this is all leading but it looks grim to me at this point for a lot of the world economy as this unfolds.

Back in the 80s when the last oil patch crash happened several banks had to close their doors. Look at Penn Square Bank Oklahoma city, Okla. as a classic example.

Smaller oil companies that sold oil and gas to the majors had "Take or Pay" contracts. When it all went down and the major oil companies did not take the gas or oil and certainly did not pay (sue me was their response) Many of the smaller companies had to shut their wells in and go bankrupt. Millions and billons were lost not to mention all the jobs. The Majors got bigger when the market turned around.. Bigger gets bigger and little gets squished.

originally posted by: 727Sky

originally posted by: machineintelligence

The big banks are seriously exposed to loans to oil companies. The oil industry is taking down the biggest banks. It is like we are in the middle of a huge war and the resource providers are beating the crap out of the big banks. Not sure where this is all leading but it looks grim to me at this point for a lot of the world economy as this unfolds.

Back in the 80s when the last oil patch crash happened several banks had to close their doors. Look at Penn Square Bank Oklahoma city, Okla. as a classic example.

Smaller oil companies that sold oil and gas to the majors had "Take or Pay" contracts. When it all went down and the major oil companies did not take the gas or oil and certainly did not pay (sue me was their response) Many of the smaller companies had to shut their wells in and go bankrupt. Millions and billons were lost not to mention all the jobs. The Majors got bigger when the market turned around.. Bigger gets bigger and little gets squished.

I agree that concentrations will happen in market mixups but, the chief benefit is supposed to be that the excess capital that had been directed into the unrewarding enterprise is freed up to be used in more urgent ones, perhaps having nothing to do with oil.

I am suggesting that a free market solution will be better than an interventionist one.

When the state attempts to manage the reorganization, you get a scripted cronyist masterpiece. At least when it naturally evolves, market leaders are supported by sufficient capability and capital. As such, they have the actual mandate of consumers instead of regulators.

originally posted by: greencmp
What I fear now is more centralization, potentially to the point of nationalization. I wouldn't put it past a Sanders administration.

I agree with you 100%, but there's not much difference anymore, the US Government is now completely 'Brought to you by..." Centralization was perhaps the inevitable fruition of capitalism all along, but it seems to be blurring the lines between what we were taught was capitalism and fascism lately.
I don't know much about Sanders really as I quit television years ago and gave up on politics when I did all the research for the Diebold thread, but I'm sure if he has two hands and he's in politics, he's on the take. lol

a reply to: twitchy

Yes, it isn't as simple as monopoly/no monopoly market position though. The important aspect is monopoly prices.

Efficiencies of scale are real but big business has competition too if unprotected.

Also, there are regional limitations to commodities and energy that afford better opportunities for local production. Those are the losers in centralization. The optimal efficiencies for naturally distributed production have the added benefit of not being as interdependent though they do cooperate.

"How do you know a politician is lying? His lips are moving!!!"

-unknown

a reply to: elementalgrove

That's a wonderful scenario....but how do these workers feed their families in the time it takes to develop those technologies and then blend them in to the infrastructure? Solar is a great idea.....if you ignore the decade it will take to outfit every home, not to mention the cost. Any other breakthroughs will take time and money to build infrastructure to support it and more time to get it in to mass production and then more time to outfit each home and business.
A "technological revolution" is not going to save people NOW.

originally posted by: DAVID64
a reply to: elementalgrove

That's a wonderful scenario....but how do these workers feed their families in the time it takes to develop those technologies and then blend them in to the infrastructure? Solar is a great idea.....if you ignore the decade it will take to outfit every home, not to mention the cost. Any other breakthroughs will take time and money to build infrastructure to support it and more time to get it in to mass production and then more time to outfit each home and business.
A "technological revolution" is not going to save people NOW.

Whatever Denmark and Germany is doing do that, even Hawaii is not doing bad, and the more we double our efforts the quicker we will get there, cost will eventually drop and if I am not mistaken that's what happens in Denmark today..if we are really gunho about alternative sources there is always Helium 3 , we get our space Program working for us in real time plus spin-off technologies .www.popularmechanics.com...

a reply to: Phage

Correct.
I'd wager that most of the bankruptcies are the Mom & Pop service companies that have thrived maintaining and servicing stripper wells; at least that's whats being reported from the South Texas Oil patch.

Ever thus; it happens every 20 years or so.

a reply to: onequestion

I would be more concerned about APPL stock than 42 small oil companies right now...

originally posted by: DAVID64
a reply to: elementalgrove

That's a wonderful scenario....but how do these workers feed their families in the time it takes to develop those technologies and then blend them in to the infrastructure? Solar is a great idea.....if you ignore the decade it will take to outfit every home, not to mention the cost. Any other breakthroughs will take time and money to build infrastructure to support it and more time to get it in to mass production and then more time to outfit each home and business.
A "technological revolution" is not going to save people NOW.

Aye you are correct we have a very long and difficult road ahead of us.

A road in which we are going to need to re-learn the word community and cooperation. Humanity is much stronger than the worlds entertainment industry presents. The people of the world are becoming more and more aware of the rigged game that has caused so much suffering through the world.

There are lessons in everything and one of those is that we are not here to profit off of each other. It is an absurd notion that has resulted in our current situation. It was necessary to get us along the path of technological advancement and now what we need is a return of our spiritual advancement.

I will never be a pessimist, I have spent a fair amount of time researching the collective evil that has ruled behind the scenes, specifically within the oil/banking/intelligence/military/energy/pharmaceutical industry and each and everyone of these industries has its roots in the oil industry. Inevitably it will fall and I believe this to be the beginning of it.

Time turn off the TV and get to know your neighbor!

edit- that is not directed at you just a generalization!

As mentioned, the numbers aren't near as big as the housing crash during 2008. But, I'm more worried about the other implications, such as some of the causes of the decrease in demand (i.e. global trade and shipping basically grinding to a halt)...BDI and other indicators. Not to mention how this hits other countries, who now have to find other ways to mitigate losses (i.e. Russia)....

Call me crazy, but I think I just figured out the real reason for the drop in oil prices this past year or so...

The big oil companies are pushing out the little oil companies so they can form a corporate political monopoly over Russia and the Middle East with the new up and coming TPP/TTIP agreements.

[insert lightbulb moment here]

??

a reply to: Gazrok

What about the support industry built around the oil boom?

Last year I was supervising a tile and carpet crew and we jus got done with two hotels built in Uniontown and Butler Pa. All the building in the area was oil related.

What about Odessa and other towns like that, will they be ghost towns?

Banks have nothing to worry about any company that goes bust there will be larger companies to snatch it up from thr banks. Large companies will want thr resources even if they have to take a loss for now. Saudi Arabia can't keep flooding thr market forever. There hoping to get rid of the shale market in thr US It won't happen they are taking huge losses considering there whole economy is based on oil.

Since the US economy is not dependent on its oil sales US stocks will be fine. The panic is over countries like Russia and Argentina going broke.