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  • U.S. oil production increased an incredible 80% in the last 6 years;

  • from 5 million barrels per day in 2008, to 9 million barrels in 2014.

  • This spike came from advancements in oil extraction; horizontal drilling and hydraulic fracturing.

  • But the dramatic increase was only possible under the elevated oil price.

  • Since 2010 oil has usually been over $100 per barrel. Obviously now, this is no longer the case.

  • Half of current U.S. production comes from just two states: North Dakota and Texas. These

  • alone are where the majority of new jobs were created in the U.S. after the 2008 financial crisis.

  • Over the last six years under high oil prices, North Dakota has increased crude oil production

  • by over 500% and Texas by 200%. Even Canada has increased crude oil production by 37%.

  • The recent collapse in oil price spells big trouble for shale producers in the U.S. and

  • Canada, and, we at Future Money Trends argue, for the whole North American economy.

  • Future Money Trends argues this will also have a big impact on the whole North American economy.

  • You see shale oil extraction is generally only profitable at oil prices above $75 per barrel.

  • Today, oil is under $50 per barrel after a massive crash over 50% in just a few months.

  • If oil goes to $40 it would still take 1 to 2 years to balance out the extra 1.5 million

  • barrels per day world supply surplus. Most of this will come from inefficient U.S. shale

  • rigs and the Canadian tar sands ceasing to produce. The Middle Eastern oil ministers

  • have continually blamed U.S. shale oil drillers for oversupplying the market. OPEC says the

  • most efficient producers should maintain market share at the expense of the inefficient.

  • The last crash in oil began 2 months before the great stock crash in 2008.

  • Could there be a new crash coming?

  • The 2008 crash cut the number of operating U.S. oil rigs in half; setting the stage

  • for the rise in crude back to $100 a barrel from the low of $40. Since the crash, thanks

  • to the Fed's 0% interest rates and quantitative easing, easy credit flew into booms sectors

  • like shale oil. Crude oil rigs soared eight-fold in 5, years from 200 to 1,600 in late 2014.

  • US crude oil production has been growing at quadruple the pace of the 1960s.

  • When a sector grows this quick from easy money, there's nothing else to call it but a bubble.

  • Since QE ended in 2014 huge amounts of money stopped flowing into the U.S. economy.

  • The lack of official money printing also caused a temporary rise in the U.S. dollar index

  • by 15% in 2014, sparking the oil price decline since world crude is still priced in U.S. dollars.

  • Already the total oil and natural gas rig count in the U.S. has plunged to its lowest

  • since October 2010. The biggest one week decline in numbers of rigs in over six years just

  • happened in January 2015.

  • Oil shale production was very speculative to begin with.

  • Continental Resources, the biggest player in the Bakken, spent $1 billion more than they made in 3rd quarter 2014.

  • This was when oil was still $100 per barrel!

  • The capital expenditures of oil exploration & production companies has remained well above

  • their operating cash flow resulting in six straight years of negative free cash flow.

  • The total debt of oil exploration & production companies increased 83% in six years to $334 Billion!

  • Total debt of the full energy sector exploded 140% to $1.7 trillion today.

  • Companies are now massively cutting back; 200,000 jobs could be lost in Texas alone.

  • The Oil & Gas Equipment & Services ETF is down 50% since July. Multi-billion dollar

  • companies like Sanchez Energy and Goodrich Petroleum crashed 80 and 90% since June 2014.

  • Not only will our energy sector be drastically cut down, the rest of the economy may suffer

  • even more. We've created financial structures that only function properly under conditions

  • of constant economic growth. The financial system almost went out of control in 2008.

  • Energy company loans now makeup 18% of the US junk bond debt. According to JP Morgan,

  • three years of oil at $65 per barrel would result in 25 to 40% default rate across energy

  • junk bonds. We're now looking at worse than that. The former head economist for Morgan

  • Stanley and the IMF believes that $60 oil will be normal for the next five years.

  • The shale oil boom turned out not to be the great savior for the American economy so many

  • thought. In fact, proven oil shale reserves in the U.S. are only enough for 2 years of

  • U.S. consumption. Saudi Arabia has vastly more reserves than the United States at over

  • 8 times. This means even if the U.S. surpassed the Saudis in production it would be very

  • short lived. The U.S. will never be oil self-sufficient; unless drastic cuts were made to consumption.

  • Peak Cheap Oil is still a near reality. In the context of current central bank money

  • printing, deflation scares and currency wars; this could cause the most destructive economic

  • situation since the Great Depression. We could see the oil price spike and crash in wild

  • swings of volatility; further scaring already timid capital markets and destroying any thoughts

  • of economic recovery. This will be felt the worst in the United States.

  • Continuing from oil wars volume 1, at the same time Russia cut off natural gas to Europe

  • in January as we predicted, they announced the sale of some foreign currency reserves;

  • potentially over $7 billion in U.S. dollars they will trade for Rubles by February. They

  • also lowered their U.S. treasury holdings year over year for the 20th month in a row.

  • Combine this with the decreased oil price giving oil exporting countries much less revenue

  • to recycle into dollar denominated assets. For the first time in 18 years, oil exporters

  • are pulling liquidity out of world markets rather than putting money in. The world is

  • now fast approaching a world reserve currency shift.

  • If we see 8 to 12 months at these oil prices; U.S. shale industry will be wiped out. The

  • effect on junk bonds will cascade to the rest of the stock market and U.S. economy.

  • ...and this time there will be nothing left to catch the falling knife before it hits

  • the American economy right in the heart. Not the FED nor the U.S. government can stop what's

  • coming.

  • Liquidity will freeze up, our credit will be downgraded, the stock market will start

  • to collapse, and then we can expect the FED to come in and hyper-inflate the dollar. This

  • will cause the world to finish abandoning the world reserve currency in the last rungs

  • of trade. This will be the end of the petrodollar.

  • For our free report on how to protect your wealth, visit slash

  • Oil

  • For more videos on the Oil wars, visit slash Oil

U.S. oil production increased an incredible 80% in the last 6 years;

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B1 US oil shale production crude oil price barrel

US Collapse from Shale Oil - Oil Wars Vol. 2 - #OilWars @FutureMoneyTren

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    James posted on 2015/06/15
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