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North Sea oil companies "close to collapse"
Comments
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If oil falls to the 60's and stays there for a couple of years, Aberdeen would hurt badly.
Last time that happened was 2008-2010, 2 years of oil at or below the $60 range, in fact at one point it was in the $40 range.
Unemployment in Aberdeen rose from 1% to 3%.
Other than that life carried on much as normal.It says on the BBC website that they need $80 a barrel to break even,
No, it says a lot of production needs that, especially, as I pointed out earlier, the more marginal fields. That isn't the case for the majority of production however.
EDIT: Memory failed me, it was c. $40 not $25.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »It is true to an extent, but it's not quite as drastic as those comments make out, so there's some sensationalism in there as well.
Aberdeen always contracts a bit when the oil price falls dramatically.
Then expands again when it rises.
In terms of the total effect for Aberdeen, it's serious by Aberdeen terms, but that's mild by comparison to what happens elsewhere. When the oil price fell to the $30 range in the recession, our unemployment rose from 1% to 3%. It's now at 1.5%, and it may rise slightly, but that would still be better than elsewhere.
We've had pretty much double digit house price growth here for the last few years, new peaks, etc etc etc, so if it falls back a bit that's hardly a crisis.
The Wood comments last week noted the current oil price, if it stays this low, would require 30K odd job cuts by the end of the decade from the 330K oil workers in the UK. Most of those are not in Aberdeen by the way, we only have around 40K oil workers based here.
A lot of those small oil companies are exploiting marginal fields that rely on a high price, this is one of the things we kept warning the separatists about in the referendum, there's plenty of oil there but a lot of it is not economically viable to extract.
Production will continue, and production is the majority of work offshore, those jobs and companies will continue as they've always done, sweating the assets that have already been paid for. There may be some boardroom panic, or distressed sales, but the production will continue.
Exploration for new wells will grind to a halt, and that is most of the new investment, those exploration assets will be tasked elsewhere and local contractor rates will fall dramatically. But that's a small percentage of the overall workforce.
If oil fell to the 30's and stayed there for a decade, Aberdeen would hurt.
If oil falls to the 60's and stays there for a couple of years, not so much.
So it's very much a tale of two parts....
BTL will take the initial hit as contractors are paid off, and as UK government tax revenue suffers they will be less inclined to roll out silly schemes to prop up the failing housing market, leading to a UK wide crash with Aberdeen as the epicentre.0 -
HAMISH_MCTAVISH wrote: »Last time that happened was 2008-2010, 2 years of oil at or below the $60 range, in fact at one point it was in the $25 range.
Unemployment in Aberdeen rose from 1% to 3%.
Other than that life carried on much as normal.
No, it says a lot of production needs that, especially, as I pointed out earlier, the more marginal fields. That isn't the case for the majority of production however.
ok I see your points, I was just going what i was hearing in the news, you are more informed than me.0 -
Interestingly the BBC just had a piece about economists related to this story.
They had a couple of economists on talking about the price of oil, deflation etc. How suddenly everything was so much better for everyone and this will do wonders for the economy etc. The idea being that every £10 saved on filling up the car would instantly be spent elsewhere on stuff "just because they had £10 more".
The BBC made a simple point though - why on earth should we listen to what they say considering no economist, even recently, suggested the oil price would fall even 25% - let alone 50%.0 -
Graham_Devon wrote: »Interestingly the BBC just had a piece about economists related to this story.
They had a couple of economists on talking about the price of oil, deflation etc. How suddenly everything was so much better for everyone and this will do wonders for the economy etc.
The BBC made a simple point though - why on earth should we listen to what they say considering no economist, even recently, suggested the oil price would fall even 25% - let alone 50%.
Many may have said it privately, but predictions like that don`t sit well with the narrative that the Idiot Box tries to put across. Today they are running with Christmas Retail Frenzy! Whatever happens you can be sure that the Janet and John`s on SKY/BBC will have their "surprised" faces on when it does.0 -
Oil is not going to be cheap for only a few years, this is going to be long and pronounced. Shale oil wont be gone in a couple of years, more is discovered every year and it takes only weeks to drill the wells. Oil may end up $60-80 but I think the days of consistent $100+ a barrel are gone.Faith, hope, charity, these three; but the greatest of these is charity.0
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Oil is not going to be cheap for only a few years, this is going to be long and pronounced. Shale oil wont be gone in a couple of years, more is discovered every year and it takes only weeks to drill the wells. Oil may end up $60-80 but I think the days of consistent $100+ a barrel are gone.
I agree this is going to last a while.
But worth pointing out $60 - $80 oil is not particularly cheap.
Brent Oil has only been above $80 for 4 years of the last 30, even in inflation adjusted terms, and traded between $30 and $70 from 2000-2007.... Neither Aberdeen nor the UK oil industry collapsed during that time. In fact both prospered....
Yes, it will have an impact on Aberdeen and the UK oil industry, but that impact is relatively small and essentially amounts to returning to normal times rather than being in the rare and exceptional boom-times of $100+ oil.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Oil prices are artificially low because the U.S. has asked Saudi Arabia to pump more oil in a bid to collapse the Russian economy. So far it's working as the Russian central bank has twice raised rates, from 9.5% to 10.5% and now 17%. The U.S. is doing this partly because of the troubles in Ukraine, but mostly to pave the way for military action in Syria and then Iran.
China and Russia oppose intervention in Syria and Iran.
If Russia's foreign reserves can hold out, internal political pressure within America and Saudi Arabia will force them to abandon this phase of the oil manipulation.0 -
Oil prices are artificially low because the U.S. has asked Saudi Arabia to pump more oil in a bid to collapse the Russian economy.
There might be some truth in that, actually.The U.S. is doing this partly because of the troubles in Ukraine, but mostly to pave the way for military action in Syria and then Iran.
On the other hand, military action in Iran is unrealistic.
As for Syria... Well they tried again to play with fire and already got burned.
Al Assad is better than the alternatives and certainly, as Saddam did, he kept a solid lid over Islamists.0 -
jjlandlord wrote: »
On the other hand, military action in Iran is unrealistic.
It will happen. The U.S. can't do it just yet, because of the opposition from Russia and China. But in time the U.S. will weaken Russia financially and incentivize China to allow them to invade Iran.0
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