So, what is this “Debt Wall?” It’s the ever-increasing amount of debt that the U.S.
As they continued to borrow more money than they made, the oil and gas companies pushed back the day of reckoning as far as they could. However, that day is approaching… and fast.
According to the data
As we can see, the outstanding debt (in bonds) will jump to $110 billion in 2018, $155 billion in 2019, and then skyrocket to $230 billion in 2020. This is extremely bad news because it takes oil profits to pay down debt. Right now, very few oil and gas companies are making decent profits or free cash flow. Those that are, have been cutting their capital expenditures substantially in order to turn negative free cash flow into positive.
Unfortunately, it still won’t be enough… not by a long-shot. If we use some simple math, we can plainly see the U.S.
Shale Oil Production, Cost & Profit Estimates For 2018
REVENUE = 5 million barrels per day shale oil production x 365 days x $50 a barrel = $91 billion.
EST. PROFIT = 5 million barrels per day shale oil production x 365 days x $10 a barrel = $18 billion.
If these shale oil companies do actually produce 5 million barrels of oil per day in 2018, and were able to make a $10 profit (not likely), that would net them $18 billion.
However, according to the Bloomberg data, these companies would need to pay back $110 billion in debt (bonds) in 2018. If they would use all their free cash flow profits to pay back this debt, they would still owe $92 billion.
Yes, it is true, I am not including all U.S.
The Bloomberg data on the U.S.
I made my own chart (shown at the top of the article) by estimating Bloomberg’s debt figures (they did not provide actual figures) as it seemed more fitting to show U.S.
That being said….
I would kindly like to remind all the precious metals investors as well as those who follow the alternative media…. ENERGY IS THE KEY PROBLEM….
DEBTS = UNBURNED ENERGY OBLIGATIONS
For example, a home mortgage is a debt owed by the homeowner. Energy must be burned every day, week, month and year(s) to create the economic activity that pays the homeowner a salary to pay off the home mortgage over the 20-30 year period. Thus…..
HOME MORTGAGE = UNBURNED ENERGY OBLIGATION
Now, I can go on and on by using other examples such as car loans, boat loans, RV loans, credit cards, second mortgages, company and public debt. All of these debts are “Unburned Energy Obligations.” When you can finally look at the market in the terms of “ENERGY”, and not “FIAT MONEY”, “ASSETS” or “DEBTS”, then you will finally understand why the debt is not the real problem.
Why? Because, even if we could get
Lastly, precious metals investors who “wrongly assume” that falling oil and natural gas production is bad for gold and silver investments or stores of wealth, you are sadly mistaken. Gold and silver have been providing a store of wealth for 2,000+ years before oil and natural gas came onto the world market. Precious metals were storing mostly economic energy of human and animal labor (as well as capital created from human and animal labor).
So, when oil and natural gas production really starts to decline, the value of most STOCKS, BONDS & REAL ESTATE (where 99% of investors have their money tied up) will implode. Thus, only a 1% movement of that wealth into gold and silver will push them to values never seen before in history.
- Source, SRS Rocco