thenorphletpaperboy: Gasoline Prices at $5.00

thenorphletpaperboy: Gasoline Prices at $5.00:          Rollercoaster Gasoline Prices             Are you ready for some $1.50 per gallon gasoline? Sounds pretty good, huh? Well, i...

Gasoline Prices at $5.00

         Rollercoaster Gasoline Prices

            Are you ready for some $1.50 per gallon gasoline? Sounds pretty good, huh? Well, in my opinion, it’s heading down the pike. Yep, filling up a 20 gallon tank is going to cost you around $30. But there’s a hook, and the hook is $5.00 a gallon gasoline is also a virtual certainty. That would move your SUV to $100 for a fill-up: now here’s why; earlier this month the Saudis and Russians announced they were splitting up their little honeymoon, where they co-operated to cut oil production in order to prop up prices to around $50 to $60 a barrel. That sent shock waves through the already depressed coronavirus oil market, and the price of a barrel of oil dropped from nearly $50 per barrel all the way down to $30 per barrel. (It’s in the $20s as I write this.) The President has announced the Feds will start buying oil to put in the Strategic Oil Reserve, but that about like putting the Smackover Fire Department in charge of putting out the California wildfires. The outlook is beyond grim. 

            According to a press release by the Saudis, as of April 1^st, they are going to ramp up their 9,000,000 barrels of oil a day to somewhere around 13,000,000 during the year. The Russian, not to be outdone, announced they were also opening the taps for an unannounced major hike in oil production, and the Persian Gulf States, allies of the Saudis, said they are along long with the Saudis to boost production. As part of the same announcement the Saudis said they were cutting the price of current deliveries $4 to $6 per bbl. If you do the math, that puts somewhere around 8,000,000 bbls a day of new oil on an already depressed global market during 2020. That’s why oil dropped nearly $20 per barrel, and I’m very sorry to say, that’s not even close to the bottom of the price slide.

            Why are the Saudis and Russians trying to drive the price down?  Well, if you read their comments, it’s because they want to kill the high cost producers who are taking advantage of their price stabilization. Of course, the target is the American Shale Oil Drillers, who have put several million barrels of new oil on the market making the United States the leading oil producer in the world. However, that oil come with a high price tag, and I won’t go into why, but believe me the drilling of a 10,000 foot well, half of which is horizontal, shooting holes in 30 to 50 places in the pipe, and then blasting these holes with a sandy, water mixture that forces a couple of million pounds of sand into the ground is damn expensive. To justify spending 10 to 15 million dollars a well, the price of oil must be $40 to $50 at a minimum.

The American Oil Industry has developed a brilliant method of getting oil out of rocks that before were considered non-productive, and that technology has put several million extra barrels per day on the world market. The Saudis and Russians feel like they have been propping up the price of oil while the United States increases production and takes up more of their share of the world market. Very simply put, they are committed to put a stop to that.

            Consider this: if just the threat of increasing production dropped the price of oil $20 per barrel, what will happen if the Saudis and Russian actually put an extra 8,000,000 barrels of oil on the world market? Both countries have already committed they are willing to reduce their price in order to keep their market share, so the price of oil will tumble. When you drop below $30 per barrel that puts most of the shale wells uneconomical, and a further drop to $15 per barrel, which is possible, essentially put all high cost oil wells uneconomical. That is the Saudis and Russian goal, and to keep prices low until the American Oil Industry is in shambles.

            Of course, they are targeting the American Oil Shale producers, but in the crossfire are several thousand small oil and gas operators who don’t produce one drop of shale oil, but they are operating what are known as stripper wells, which produce sometimes as low as 3 to 5 barrels a day. These wells are only economical is the price of oil is high because many of them with high labor costs and the disposal of sometimes several hundred barrels of saltwater along with the oil, must have a high price for oil or their wells won’t be economical. Those producers are in every state in the country that produces oil, and an extremely low price for oil will severely impact them. Thousands of small operators will go out of business, and some of them will be in Arkansas.

            This is the outlook, assuming the Saudis and Russians don’t kiss and makeup. The small to medium size oil companies that are heavily invested in drilling for shale oil, and are dependent upon extensive bank financing, will go bankrupt. The banks that are heavy into financing these companies will take huge losses. The companies with strong balance sheets will pull back from drilling and several thousand drilling rigs will be stacked. Several hundred thousand oil workers will lose their jobs.

            The United States oil production will began a decline this year that will ultimately be as much as three to five million barrels a day. That is the Saudis and Russians goal. However, the real question is how long will they hold down the prices by overproducing? I have a gut feeling, since they tried this once back in the 1980s, and they did cut production but it went right back up quickly, that this time they will try to finish the job and the oil industry in the United State will suffer not just a few months, but maybe as long as two years.

            Well, that’s the $1.50 gas time. Now, if we look to the future, we know exactly what will happen, but not the timing. When the Saudis and Russians see the drop in oil production from the United States is sufficient to resume their proration, and our infrastructure is sufficiently damaged, they will agree to curb production and the price of oil will steadily climb. How much? The Russians need $40 to $50 per barrel for their country’s budget and the Saudis need at least $80 per barrel, so prices will climb back to above that level. However, in the past, a Saudi oil minister stated he thought $100 per barrel was a fair price for oil. Will the Russians and Saudis stop at $100 per barrel? What do you think?  

            The bottom line is simple: cheap gasoline seems like a good deal, but the long term costs to get that $1.50 gasoline for a year or so, will greatly overshadow the short term benefits.

Well, I’m sitting here with the coronavirus sweeping the country, oil prices whistling down, and the stock market dropping like a rock, wondering, “Where am I going, and why am I in this handbasket?”

thenorphletpaperboy: Confessions of a Pokerholic

thenorphletpaperboy: Confessions of a Pokerholic:          Confessions of a Pokerholic Yes, I’ll admit it. Playing poker is something I truly enjoyed doing, but I don’t play anymore....

Confessions of a Pokerholic

         Confessions of a Pokerholic

Yes, I’ll admit it. Playing poker is something I truly enjoyed doing, but I don’t play anymore. This is my poker story.

I started playing poker in high school, and it was penny ante, nickel betting. By the time I started college at the University, I was just an okay player. However, I had no longer checked into Razorback Hall, when my roommate yelled, “Hey, Richard, there’s a poker game going on down the hall, and they are looking for another player.” I joined the game, and over the next year or so I played “Dealers Choice” games, which were every imaginable variation of the game.

 After my father was killed in an automobile accident when I was a sophomore, I had to work my way through college and playing poker wasn’t just for fun. I was out to win, and win I did. As I started my junior year, I started playing at several fraternity houses, especially the basement in the Kappa Sig house, where the betting moved up several notches. Well, along the way, something told me, if I wanted to win, instead of just enjoying the poker games, I had better keep a clear head and that made me a complete teetotaler. Never a drop of anything that might affect my judgment, and that made a great deal of difference in a lot of games, where sloppy betting on weak hands late in the game lined my pockets. By the time I was a senior, I had mastered every possible “Dealer’s Choice” game. In dealer’s choice, the dealer can call any variation of five card or seven card stud. Such as one-eyed jacks are wild or maybe throw in two jokers to liven up a hand. That makes three of-a-kind, a very possible winner in five card stud without wild cards, a possible loser with wild cards.

However, after my senior year I got married, and skipped a semester to work at a refinery and save up money to get a Master’s Degree. The summer after my first semester in graduate school, I got a job as a roustabout on an offshore drilling rig, and my poker playing got a real jolt. We were working fourteen days out in Gulf, 12 hours a day with a week off. On an offshore rig there’s not much to do but work, eat, and either watch TV or play poker. I played poker and did so every night. Now, I’m not going to lie and tell you I cleaned out those tough, coonasses, because for the first two weeks, I ended up almost working for nothing. They were head and shoulders above any players I had ever played with. But I got better, and after a second two week shift at least I wasn’t losing my shirt. By the last week in July I was beginning to win back some of my money and during August I finally was in the black.

 I played a lot of poker hands that summer, but I only really remember one hand. Because of the tendency of the guys to call almost any hand, I never bluffed. We were playing seven card stud, where four cards are dealt up and three down. You bet every time a card is dealt. The last card is a down card. As the game progressed Shorty was showing three aces, and I had three threes showing. Shorty was licking his chops and made a big raise when his third ace showed up. I would have normally passed and let Shorty have the pot, but as I looked around I noticed the other ace had been dealt and my fourth three was still in the deck. I called. Then I decided, if ever I was going to bluff this was the time. The last down card was dealt, and I peaked. It was a seven, but I cracked just a very small smile and started playing with my chips, while Shorty prepared to bet. He noticed me and his bet wasn’t a push in all the chip, but I did. Shorty looked at me and then he slowly pushed his cards to the center of the table. He had folded. I took my cards and stuck them in the middle of the deck. That ended game and a day later, when I was about to step in the basket to be lowered down to the crew boat, Shorty came up to me, “Did you have the fourth three?”

“Naw, Shorty, I was bluffing.”

“Damn! But you never bluff!”

“Don’t say never say never, Shorty.”

That next year in college trying to make my grades in graduate school and work at several jobs while being a newlywed, didn’t give me any time to play poker. When I finished my graduate work and had a BS MS in geology I went to work for Exxon in South Texas and a new jobs with new friends didn’t give me much time to play poker, but that was about to change. I took a transfer to Libya and my work as a wellsite geologist sent me into the Libyan Desert for two weeks at a time, and guess what? I played poker every day and night. My job was to check the drilling samples and some days the sample checking only took an hour, so it was play poker every night and most days. I even drove down to the British Petroleum Camp and the Oasis Petroleum Camp to play. The offshore rig playing had really honed my game, and I was a regular winner during my Libya playing.

After two years I transferred back to Corpus Christ where I would be working as a sub-surface exploration geologist, and guess what? I immediately joined a group of guys who played poker every Friday night. It was a great group of geologists who worked together, played poker every Friday night, and of course drank a lot of beer while doing so. I was a winner almost every time we played, and I would frequently come home with an extra hundred or two.

That went on for several months until Vertis said, “We need to have a talk.” That sounded so serious that I immediately sat down, and she started explaining.

“Richard, you know we’re friends with all those couples whose husbands you play poker with every Friday night, and I’ve been talking with several wives… They want you to drop out of the game.”

“What? But..But..But….”

“Richard, you’ve played a lot more poker compared to those guys, and you don’t have anything to drink while playing. You’re are winning every time you play.”

“Well what’s wrong with winning?”

 “Several of those couples are right out of college, and they really can’t afford to lose fifty or a hundred dollars a night. Before you started playing the winning and losing was spread around.”

In all my years of playing, I’d never considered that. That next Friday night I told Vertis to get in the car.

 “Let’s go to Ship Ahoy and eat shrimp.”

“But it’s your poker night.”

“Not anymore….There are some things more important than winning.”

I haven’t played since.