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The problem with that reasoning is that there's no fundamental law of nature that dictactes what "normal" means; instead there is a complex network of interrela

The problem with that reasoning is that there's no fundamental law of nature that dictactes what "normal" means; instead there is a complex network of interrelated forces that is itself kind of resilient but whose individual states are very fragile. Under those conditions, it is practically imposible to "go back" after having disrupted the status quo. On the one hand, there is such thing as supply destruction, oil producers that are marginally profitable and that go out of business if price collapses, taking tons of hard capital (not financial, but equipment, personnel know how, etc). The Saudis are pressumably aware of this and very much doing it on purpose. The problem is that there also exist demand destruction. Companies that consume energy in large quantities to produce economically useful but expensive goods and services. This guys conversely go out of business when oil price spikes (there was some statistic going around in 2008 about how 5 out of the last 6 recesions in the US where correlated with high energy prices), which is the intended effect of Saudi strategy. So, eventually, when the noise signal introduced in oil prices gets absorbed by the market negative feedback loops, the economy we go back to will likely be smaller than the economy we started with. We could debate wether this is a good thing or a bad thing, but many actors are nervous because this is a game of musical chairs, and very few can say they will have a guarrantied place at the table by the time the rubble stops bouncing.

a3n 11y ago
> On the one hand, there is such thing as supply destruction, oil producers that are marginally profitable and that go out of business if price collapses, taking tons of hard capital (not financial, but equipment, personnel know how, etc). The Saudis are pressumably aware of this and very much doing it on purpose. Doesn't that equipment get sold? If not immediately, then eventually, modulo the odd pipe that gets bent or rusted in storage. And those people are largely available for the jobs they're experienced at when jobs are available, so they aren't "destroyed" either, they're just idled. Some will move on, some won't.
- AnthonyMouse 11y ago
  > Doesn't that equipment get sold? If not immediately, then eventually, modulo the odd pipe that gets bent or rusted in storage. A lot of it, no. A lot of equipment is built on site and would have to be destructively disassembled to be moved, but just leaving it there without using or maintaining it will cause it to rust or be damaged by the elements. And even the equipment that can be resold and still physically exists would have to be transported back to the site at significant expense. A lot of the sites are in remote locations. > And those people are largely available for the jobs they're experienced at when jobs are available, so they aren't "destroyed" either, they're just idled. Some will move on, some won't. The "some will move on" being the trouble. You have somebody who knows how to do a specific thing not many people know how to do, you lay them off and they go find some other job doing something else that pays about as well, move house, put their kids into new schools, now you want them back. Good luck with that.
- crpatino 11y ago
  No, it gets destroyed. Assests are not abstract. They are deployed to one particular site, and a big part of the cost goes to install them in that site. That's why all producers are basically operating at a cost right now. You may reopen a closed oil ring (assuming you did nothing destructive to maximize your short term wins, which fraking companies are, AFAIK). The personnel question is a tricky one. People need to eat, so if they face a downturn, many will be discouraged and move to different careers. Some will return, if the market picks up enough to pay way above average wages, but some just definitively won't. You will have to make up the difference by training a fresh crop of young crew members. And I find it amusing to see that a subset of the HN audience can have such a hard time to grasp that other industries might have their own talent acquisition problems.
uptown 11y ago
Parts of North Dakota are a good example of the impact of the fluctuating oil markets. They experienced an economic boom, with more jobs than manpower which spurred an influx of people, new housing development, and growth in the local economies. Now that the price of oil has collapsed, it's left towns in financial despair: http://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/ http://www.theatlantic.com/business/archive/2015/06/north-da...

a3n 11y ago

> On the one hand, there is such thing as supply destruction, oil producers that are marginally profitable and that go out of business if price collapses, taking tons of hard capital (not financial, but equipment, personnel know how, etc). The Saudis are pressumably aware of this and very much doing it on purpose. Doesn't that equipment get sold? If not immediately, then eventually, modulo the odd pipe that gets bent or rusted in storage. And those people are largely available for the jobs they're experienced at when jobs are available, so they aren't "destroyed" either, they're just idled. Some will move on, some won't.

AnthonyMouse 11y ago
> Doesn't that equipment get sold? If not immediately, then eventually, modulo the odd pipe that gets bent or rusted in storage. A lot of it, no. A lot of equipment is built on site and would have to be destructively disassembled to be moved, but just leaving it there without using or maintaining it will cause it to rust or be damaged by the elements. And even the equipment that can be resold and still physically exists would have to be transported back to the site at significant expense. A lot of the sites are in remote locations. > And those people are largely available for the jobs they're experienced at when jobs are available, so they aren't "destroyed" either, they're just idled. Some will move on, some won't. The "some will move on" being the trouble. You have somebody who knows how to do a specific thing not many people know how to do, you lay them off and they go find some other job doing something else that pays about as well, move house, put their kids into new schools, now you want them back. Good luck with that.
crpatino 11y ago
No, it gets destroyed. Assests are not abstract. They are deployed to one particular site, and a big part of the cost goes to install them in that site. That's why all producers are basically operating at a cost right now. You may reopen a closed oil ring (assuming you did nothing destructive to maximize your short term wins, which fraking companies are, AFAIK). The personnel question is a tricky one. People need to eat, so if they face a downturn, many will be discouraged and move to different careers. Some will return, if the market picks up enough to pay way above average wages, but some just definitively won't. You will have to make up the difference by training a fresh crop of young crew members. And I find it amusing to see that a subset of the HN audience can have such a hard time to grasp that other industries might have their own talent acquisition problems.

uptown 11y ago

Parts of North Dakota are a good example of the impact of the fluctuating oil markets. They experienced an economic boom, with more jobs than manpower which spurred an influx of people, new housing development, and growth in the local economies. Now that the price of oil has collapsed, it's left towns in financial despair: http://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/ http://www.theatlantic.com/business/archive/2015/06/north-da...