$20 Oil and non-Houston Markets

[Ethan G.]

I'm in Houston and work as an attorney with only energy clients and my business has been severely impacted.  I've also seen the real estate market locally cool over the past 6 months and the trend is down.

How are things going in Dallas, Austin, San Antonio, etc.?

[Cal C.]

Please don't make the mistake of thinking this is about the big oil companies squeezing out the little guys.  This is about Saudi Arabia trying to maintain their market share.   Basically this ($50 or less oil) will stop when either the Saudis run out of money or there is a severe cutback in production, further than what we've already seen.  Don't forget the Saudis also have a great incentive to keep selling oil at almost any price to prevent Iran from taking market share when Iranian production comes back online, thanks to the lifting of sanctions.  

Also in the past we had a good bit of sway with the Saudis but after the end of sanctions that is no longer the case.   Saudis are more than smart enough to realize that long term it is definitely in their interests to severely damage US fracking operations.  Back to your point about big oil squeezing out the little guy, it would be much cheaper for them to simply buy out the little guys than have a multi year period of cheap oil.   Big oil has been cancelling lots of projects and laying off thousands of workers and that is very costly.   

One other more esoteric thought, frackers (for lack of a better term) have been borrowing heavily the last year to continue to finance their production, and now a lot of the loans (bonds) they took out are junk.   This will have negative effects on all oil companies' ability to get the best rates on loans for sometime to come.