Friday, October 24, 2008

Katy Freeway Needs a Bailout – Fast!

A little levity for today. If you’re not from Houston, the Katy Freeway (I-10) is home to major operational centers for Exxon, Chevron, Conoco and Royal Dutch Shell, amongst many other smaller firms.

From Kansas to Qatar, investors are pulling their money out of oil until they know how low oil prices will really go. The market is plunging as oil prices have fallen by over 50% in the last few months. If the government doesn’t act soon, this crisis will spread from the Katy Freeway to Main Street. Oil companies are quickly finding that no one wants to buy their oil at its true value.

There are already unsubstantiated rumors of some highly leveraged oil speculators shutting down production. The panic setting in on the Katy Freeway is spreading. Although, only two oil companies have declared bankruptcy so far this year for seemingly unrelated reasons, experts believe that dozens of oil companies are on the brink of bankruptcy. The fear gripping the market right now could lead oil companies simply to halt drilling and production until the bottom is reached.

The U.S. Energy Secretary has announced an $800 Billion plan to purchase oil wells around the country, and possibly outside of the United States, to drive up prices and get oil companies drilling again. The Secretary and Federal Reserve Chairman Ben Bernanke argued before Congress that the American taxpayer would not be left holding the bag, as they have already agreed to debase the value of the dollar to drive up oil prices and make a killing.

Ample evidence abounds that the “Energy Crunch” is spreading from the Katy Freeway to Main Street. Power outages from the shortage of oil have been widespread. Jim Boone, of Louisville, Kentucky, reports no power for up to three hours yesterday at his Burger Barn restaurant saying, “Power just isn’t available anywhere.” The fear on Main Street is just as palpable as it is on the Katy Freeway.

Many experts believe that if the government doesn’t marshal a plan to rescue the price of oil, we could see mass shortages soon. Bob Samuelson, President and Chief Strategist of BS Investments comments, “Prices at the pump may fall under $2, but there won’t be any gas to be had. It’s simple economics.” He also adds, “Some investors may want to consider melting down their cars to build bicycles to weather the current crisis.” However, Warren Buffet has tried to reassure Americans in an op-ed for the Wall Street Journal that, “In the long run, the automobile will get you where you need to go at a much faster pace than a bicycle.” Warren Buffet in another interview for CNBC reiterated this point by revealing plans to buy a grossly underpriced late model Buick he saw on Craigslist over the weekend.

Tonight, the President will deliver a speech to the American people to reassure them that the government will be able to solve this crisis.

3 comments:

engineering said...

So now the government has to bail out every single industry that is not doing well? Whatever happened to free market economy?
If the oil price goes down so be it. Producers want to make extra cash and drive the cost of oil by a fake market balance? so be it. Bottom line, the higher the demand the better is the market for alternative fuels. People will make the shift from gasoline to alternative fuels and the oil industry will likely loose those customers forever.

Brian Shelley said...

Engineering,

Did you not notice the "A little levity" and the tag at the bottom "humor"?

I was kidding and parroting the hysteria around the credit crisis.

Brian Phillips said...

That was pretty funny.

I'm just waiting for the Congressional hearings on why the price of oil is falling so far, so fast. Obviously the oil companies have some kind of devious scheme going on. They must think that we are fools.