I predicted last winter – when oil was fetching $110/barrel – that we’d see $50 oil soon. Today – with bonds through the roof and a whiff of deflation dampening the Wall Street party – crude for October delivery looks set to close near $44.
The oil bubble had to be pricked. The Fed is counting on the extra cash folks find in their pocket from savings at the pump to bring us out of this protracted economic funk. The dollar has de-linked from oil. And those pesky Russians, Iranians and Venezuelans had to be put in their place.
But the biggest beneficiary of this latest bursting bubble will be the Four Horsemen – Exxon Mobil, Chevron Texaco, BP Amoco & Royal Dutch/Shell. Industry acquisitions have begun in earnest as small drillers and coal companies file for bankruptcy or are forced to sell to Big Oil for pennies on the dollar.
On July 17th Milagro Energy, which has 1,200 wells in South Texas and Louisiana, was the latest small oil firm to declare Chapter 11 bankruptcy. Shell announced in April that it would acquire Britain’s BG Group for $70 billion. BP is rumored to be looking to buy Penn Virginia, while Exxon is eyeing Anadarko Petroleum.
In the oil services sector, Halliburton’s attempt to buy Baker Hughes is under Justice Department review.
Big Oil will also gobble up suddenly cheap drilling rights in West Texas and other places. Just yesterday Exxon Mobil signed two agreements to expand its control over the Permian Basin via its XTO Energy Inc. subsidiary.
There is even much talk about mega-mergers, the most common being that Exxon Mobil may buy BP Amoco.
So while consumers catch a short-term break when they tank up, the Four Horsemen – who control the oil sector vertically from drill rig to gas pump AND the energy sector horizontally via ownership of coal, natural gas and nuclear power assets – will get yet more powerful.
A sensible government would not only disallow further Big Oil acquisitions, it would break up the Four Horsemen using existing laws – namely the Clayton & Sherman Anti-Trust Acts. Don’t hold your breathe.
Dean Henderson is the author of five books:Big Oil & Their Bankers in the Persian Gulf: Four Horsemen, Eight Families & Their Global Intelligence, Narcotics & Terror Network, The Grateful Unrich: Revolution in 50 Countries, Das Kartell der Federal Reserve, Stickin’ it to the Matrix & The Federal Reserve Cartel. You can subscribe free to his weekly Left Hook column @www.hendersonlefthook.wordpress.com