By Michael Snyder – The Economic Collapse Blog
Never before have we seen a year start like this. On Monday, Chinese stocks crashed once again. The Shanghai Composite Index plummeted another 5.29 percent, and this comes on the heels of two historic single day crashes last week. All of this chaos over in China is one of the factors that continues to push commodity prices even lower. Today the price of copper fell another 2.40 percent to $1.97, and the price of oil continued to implode. At one point the price of U.S. oil plunged all the way down to $30.99 a barrel before rebounding just a little bit. As I write this article, oil is down a total of 6.12 percent for the day and is currently sitting at $31.13. U.S. stocks were mixed on Monday, but it is important to note that the Russell 2000 did officially enter bear market territory. This is yet another confirmation of what I was talking about yesterday. And junk bonds continue to plummet. As I write this, JNK is down to 33.42. All of these numbers are huge red flags that are screaming that big trouble is ahead. Unfortunately, the mainstream media continues to insist that there is absolutely nothing to be concerned about.
A little over a year ago, I wrote an article that explained that anyone that believed that low oil prices were good for the economy was “crazy“. At the time, many people really didn’t understand what I was trying to communicate, but now it is becoming exceedingly clear. On Monday, one veteran oil and gas analyst told CNBC that “half of U.S. shale oil producers could go bankrupt” over the next couple of years…
Half of U.S. shale oil producers could go bankrupt before the crude market reaches equilibrium, Fadel Gheit, said Monday.
The senior oil and gas analyst at Oppenheimer & Co. said the “new normal oil price” could be 50 to 100 percent above current levels. He ultimately sees crude prices stabilizing near $60, but it could be more than two years before that happens.
By then it will be too late for many marginal U.S. drillers, who must drill into and break up shale rock to release oil and gas through a process called hydraulic fracturing. Fracking is significantly more expensive than extracting oil from conventional wells.
Since the last recession, the energy industry has been the number one producer of good paying jobs in this country.
Now that those firms are starting to drop like flies, what is that going to mean for employment in America?
About the author:
Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.
Read his new book The Beginning of the End