I'd like to know what u find troubling. ;^)
I agree with about 70% of what he said (that number kept dropping as I wrote this). Differences: 1. I don't think oil prices are holding back GDP growth and I think he has his production-GDP relationship backwards, 2. I don't think Shell is a barometer for the industry 3. I don't think the divestitures "to raise cash" are being done as some sort of desperation move to mollify investors. In many cases the properties being divested were acquired during what was effectively a mindless feeding frenzy and having assessed those properties, the chaff is now being sold to equally undiscerning folks (although arguably dumber). It is implicit in his argument that the assets can be productive and that just ain't always true. The asset fire sale he referred to could make coal look fashionable.
I find his Goldman-Sachs graph difficult to believe. I would never put money in most of the companies on the far left of that graph (there are a few in the middle and right too ;^) )
Oil companies are cutting capex but those are some very lofty numbers and as the man implied, oil companies have a long history of being reckless with money because there was always more. Gaining discipline is not a bad thing. Some companies have been good about this for a long time but even the best have made the occasional colossal blunder.
As part of the increasing cost to oil companies, I'm quite happy with the situation. However, a sustained period of a non-supply constrained market (now approaching 6 yrs) has given the oil companies much greater control of their costs. Conversely, humans, or lack thereof, is a cost they do not have control of.
I agree the world is "oil short" in the long run although at the moment it certainly is not. I would've called the oil short situation "supply constrained". As he said, when oil is made available, it is consumed. The folks with the stashes are regulating the supply and price. Joe Shmoe is not cutting back on his activities because oil is $100/bbl and he seems to celebrate every time it approaches $90. As one of my former colleagues observed of traffic in Cambridge, MA in 2007 when oil was well over $100 and economies were booming: "I'll believe oil prices are hurting the consumer when every other car on the street isn't an SUV occupied by one person". I haven't noticed a huge decline in SUVs on the road.
AI
