The Wall Street Journal’s recent editorial “How America Broke OPEC” shows that even high-quality journalism is susceptible to the contagion of alternative facts.
It is a propaganda piece about how the underdog U.S. oil industry miraculously rose from the ashes and kicked OPEC’s ass.
Never mind that the U.S. has been an oil super power super forever so the premise of the editorial is bogus to begin with.
How Can U.S. Oil “Win” If It’s Broke?
More importantly, how is it possible that the business-focused Wall Street Journal failed to mention that American tight oil—the object of its praise—is broke?
U.S. tight oil lost money in the 3rd quarter of 2018 (Figure 1). Capital expenses have exceeded cash from operations in almost every quarter for the last decade.
That includes the Permian basin darling companies Diamondback, Concho and Pioneer.
Great info from Art Berman regarding the false narrative of “shale oil dominance” that is trotted out by the media. This whole shale oil phenomenon is a debt based ponzi scheme that has been enabled by ten years of irresponsible FED money printing.
Every time the FED goes into one of these money printing events it leads to a bubble. We had a bubble in tech stocks back in 2000, a housing bubble in 2008, and now an everything bubble in 2018.
Shale oil is one manifestation of this easy money. As rates head higher and money becomes tighter it will be more difficult for these shale oil players to roll their existing debt much less take on new debt.
This is one of the reasons I am so bullish on oil prices over the next few years. When this shale oil bubble pops supply destruction is going to come on fast and oil prices are going to rise. Because of the artificial supply/demand signals being sent by debt-based shale oil, investment in conventional oil has been ignored and the industry has set us all up for a price spike when supply tightens.
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