“Fracking has literally broken the business model of the entire fossil fuel sector,” Williams-Derry said.
Today, fracking operations are plagued by bankruptcies,
That’s kind of the oil companies salvation, that.
Famed short seller Jim Chanos has been short the fracking companies for years, because their business model was unsupportable; it depends on much higher oil prices, else their product is too expensive compared to traditional drilling methods.
The frackers go out of business, the price of oil firms up.
In the last month, with would-be drivers huddled indoors and Saudi Arabia and Russia each dumping cheap oil on the market to undercut the other, supply so outpaced demand that the price of a barrel of oil briefly fell below zero.
Well, the drop below zero had to do with futures selling, but let’s not digress. Oil was never worthless.
Though, there is no firm line between healthy and unhealthy. “Investment grade BBB- already has a lot of risks,” he said.
That’s true. Once you drop below BBB+, the default rate rises exponentially.
On the other side, more than 40 Democratic lawmakers worried about a bailout for oil and gas firms sent a letter to Mnuchin and Fed Chairman Jerome Powell urging them not to include fossil fuel firms in the bailout, writing, “It will only artificially inflate the fossil fuel industry’s balance sheets.”
Well, that would be ill advised. The goal here during this crisis is to save jobs, not create another problem because you want to tinker with an industry.