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Five Reasons Why Global Oil Is About to Go Bust

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(TRUNEWS) Dramatic changes are taking place in the global oil industry, and it could mean a substantial downturn in economies around the world.  Consider the following:

Oil Bankruptcies Are Daily News

It was announced on Thursday by CNBC that Energy XXI, a large producer of oil in Texas, Louisiana, and the Gulf, has filed for bankruptcy protection.  The company will eliminate more than $2.8 billion in debt from its balance sheet through the Chapter 11 restructuring, it said in a statement.  Energy XXI’s bankruptcy filing underscores the stress oil and gas companies face as oil prices hover around $40 a barrel, down from above $100 almost two years ago. The company’s break even is at $60 and above.

Government Continues Attacks on Oil

Fox News reported on Tuesday that the Attorneys-General of a number of states are planning a legal-frontal assault on a number of oil companies, reminiscent of the cases against Big Tobacco.  The claim?  Energy organizations are accused of misleading consumers of the risks of global warming. A total of 17 U.S. attorneys general are cooperating on probes into whether fossil fuel companies have misled investors on climate change risks. The officials will also collaborate on other climate-related initiatives.

The Oil Freeze that Thawed

In spite of talks of a projected freeze on oil production, it now appears that OPEC has no intention (perhaps never HAD the intention), and slowing down supply.  Oil futures fell from fresh four-month highs in choppy trading on Wednesday as comments from Russia’s energy minister added to doubts a producer meeting set for Sunday in Doha to discuss freezing output would yield a positive outcome. Oil prices fell on Wednesday after Reuters reported that Russian oil minister Alexander Novak told a closed-door briefing that a deal on an oil output freeze scheduled to be signed this month in Doha will be loosely framed with few detailed commitments. Basically, not an oil freeze, but rather an oil ‘slush’.  The prospect of a combined OPEC and non-OPEC deal to prop up prices has boosted oil in recent weeks but analysts said that even if a deal is struck, it will do little to restore supply/demand balance.

Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman reacts upon his arrival at the Elysee Palace in Paris, France in this June 24, 2015 file photo. REUTERS/Charles Platiau/Files

Saudis Moving Out of the Oil Business

Saudi Arabia is making substantive efforts to move away from an oil-based economy.  In late February, several hundred Saudi officials, company executives and foreign consultants gathered in a luxury Riyadh hotel to discuss how Saudi Arabia’s economy could survive an era of cheap oil. One company manager at the event told Reuters that officials from about 30 Saudi government bodies manned booths in which they described their challenges. Corporate bosses were encouraged to “figure out ways to do partnerships to address those needs, to offer feedback, to complain, and to plan future ventures or even just future meetings,” the manager said. “It was like a private sector version of a national parliament.” The workshop was part of Saudi government attempts to work out how to restructure the economy so it no longer relies on oil. The National Transformation Plan (NTP), as Riyadh has dubbed the changes, is expected to be unveiled in the next few weeks. Much is still secret. Ministries have refused to discuss plans in detail and Western consultancies contacted by Reuters declined to confirm their involvement, let alone policy details.

VLCC supertankers are seen travelling between India and Southeast Asia in this illustration photo of an Eikon ship-tracking screen April 7, 2016. REUTERS/Thomas White/Illustration

No Where For Oil To Go

The massive congestion of oil container traffic worldwide.  As ports struggle to cope with a global oil glut, huge queues of supertankers have formed in some of the world’s busiest sea lanes, where some 200 million barrels of crude lies waiting to be loaded or delivered. The vessels, filled with oil worth around $7.5 billion at current market prices, would stretch for almost 40 km (25 miles) if formed up in one straight line.  The worst congestion is in the Middle East, as ports struggle to cope with soaring output available for export, and in Asia, where many ports have not been upgraded in time to deal with ravenous demand as consumers take advantage of cheap fuel.  Ship tracking data shows 125 supertankers, with the capacity to carry oil to supply energy-hungry China for three weeks, waiting in line at ports. The combined daily cost is $6.25 million, based on current ship hire rates of around $50,000-a-day.

These signs are just a few of the ones that are pointing toward a massive shake-up taking place within the oil industry.  As energy has become the currency of the modern world, whoever controls the production, pricing and distribution of commodities such as oil are the true global power brokers.  All of these changes taking place could be signaling a massive global economic downturn.

How Should Believers Respond To The Changes in the Global Oil Economy?

Followers of Christ can remain confident even in times of tremendous economic change.  Consider these Biblical responses to times of crisis as outlined by GotQuestions.org

1. Continue to practice wisdom.
The Bible is filled with wise principles about money and work. Laziness is never a good thing; we know that a lazy man who refuses to work will have nothing at the time of harvest (Proverbs 13:420:4). Diligence is rewarded with wealth (Proverbs 12:27), but massive wealth brings its own trouble (Proverbs 13:8). Gaining little by little over time is wiser than gaining a large sum all at once (Proverbs 13:11), but toiling and laboring endlessly to gain wealth is not the action of a discerning man (Proverbs 23:4). All of these principles, plus many more to be found in Scripture, are tried and true and will be useful in a bad economy as well as a good one.

2. Remember God’s economy.
Certain principles will always be true, regardless of one’s economic situation. Cheerful generosity will bring a harvest—although the reaping may have to wait until the world to come (2 Corinthians 9:6–7). Giving to the needy carries a reward (Matthew 6:4). God never promises that we will be wealthy in this world, or even that we’ll always have as much as we want, but He does promise to supply our needs, along with giving joy, peace, and spiritual productiveness to those who have His Spirit (Galatians 5:20–21John 7:38). If we seek first the kingdom of God, all necessary things will be added to us (Matthew 6:33). Our priority should always be spiritual. Christians are compared to soldiers in a war; soldiers are not concerned with civilian pursuits while they are engaged in combat (2 Timothy 2:3–4). A bad economy will not be of too much concern for a soldier, because his mind is on other things. This is the attitude a Christian should have toward money matters. Of course, we are to manage money wisely and be generous, but it is foolish to place trust in money or anything else in this world that is so easily destroyed and lost (Matthew 6:19–21).

3. Trust in God’s provision.
When savings accounts begin to dwindle as a result of an economic downturn, we can easily be tempted to fear, wondering how we will be provided for in the future. However, God has promised to provide for us, no matter what economic situation we are in. He fed Elijah with food delivered by ravens (1 Kings 17:4–6). He caused the widow’s cruse to not run dry and her bin of flour to always be full (verse 16).God even cares for the sparrows and feeds them; He will not fail to feed His children (Matthew 6:25–27).



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