Good morning; here's what the Oilman has for you today:

• U.S. Debt Default Could Never Happen, Right?

• What To Do With Windfall Profits?

• Tweet of the Day

U.S Debt Default Could Never Happen, Right?

Oil prices fell on Tuesday even though the API estimated an inventory decline of over 6 million barrels.

Why?

Because it’s debt ceiling negotiation season again, and things are not looking good.

The shadow of debt default spreads its wings again

Every time Congress starts arguing about the debt ceiling, analysts crawl out from under all sorts of rocks to predict debt default and devastation.

It’s not just analysts, either.

Here’s what the Treasury Secretary had to say about a possible default:

"A default on our debt would produce an economic and financial catastrophe," Janet Yellen said Tuesday.

"A default would raise the cost of borrowing into perpetuity. Future investments would become substantially more costly."

Wow. When a Treasury Secretary starts talking gloom and doom, you know things are bad, right?

Good thing a default has never happened before, right?

…Accept the four times it did happen.

But on the off chance that it happens (again)...

Oil will plunge like it hasn’t plunged since Covid. This is the demand destruction theory.

However, oil’s price could skyrocket in the event of a debt default. That’s what Josh Young sees happening, with demand only falling due to prolonged high prices.

Reports from Capitol Hill suggest disagreements between the parties run deep.

Republicans have proposed combining a spending cuts plan with a raise of the debt ceiling, but Democrats have already signaled they’ll reject it.

Unless an agreement is reached soon, the default could become a fact by June.

And oil demand will drop off a cliff as everything becomes more expensive.

Consumer sentiment is already too low for comfort. Imagine where it will go when mortgage rates and other credit costs soar.

There’s no production cut that OPEC could make that would prop up prices if that happens.

Fortunately, it’s really unlikely to happen.

After all, it has never happened before…except for those times it did.

Today's Edition is Brought to You By Energy Builders Podcast

Get an inside look at the entrepreneurs making waves in the industry and learn from the drillers and deal-makers who know how to make a profit in the field. Don't miss out on this action-packed listening experience – tune in to Energy Builders now and discover the secrets of success in the oil and gas business.

Listen on Apple Podcasts, Spotify, and more.

What To Do With Windfall Profits?

It’s profit-reporting time again, and the biggest names in oil are expected to book robust results yet again.

But this time, it will be refining that will drive their bottom lines higher.

Mild winter, low prices, slimmer bottom lines

The mild winter in most of the northern hemisphere pushed down the price of both oil and gas.

This means Exxon, Chevron, and their peers will report lower earnings for this year’s first quarter.

Yet “lower” does not mean “worse.”

Not this time.

Because this time, the majors have clung to the extra money they made last year from the war-driven price spike.

This time, the majors were smart.

And they also enjoyed resilient demand for the products they make at their refineries.

Demonized or not, the oil industry is looking strong and healthy. Environmentalists won’t like that, but such is life.

It may also be ready for some M&A action.

Windfalls equal acquisitions

Thanks to their disciplined approach to the massive profits they booked last year, the majors are now in a perfect position to consolidate the industry.

A string of recent deals certainly suggests there’s more appetite for mergers and acquisitions.

The report about Exxon’s potential intentions for Pioneer really made a splash.

And there may not be a lot of time left to make the best of shale.

"If shale oil is becoming long in the tooth and you can’t deliver enough production growth organically. You may see some firms looking for growth via acquisition," said one equity analyst from CFRA.

Not everyone buys the “peak shale” argument. Actually, many don’t.

But when you’ve got so much money, and you want to be cautious with new investments, what do you do?

You go shopping, of course.

Around the Global Patch

🇪🇺 EU's new emissions policy sends shockwaves through industry.
🇦🇺 Australia's bold move to cap prices till 2025 revealed.
🇧🇷 Brazil's mega pipeline tender sets stage for Equinor's pre-salt sequel.

Tweet of the Day

Thanks for reading today's Oil Patch!

Stay oily, my friend.

Two quick requests before you go:

• If you found this useful, forward this email to a friend to spread the word. 👇

• Take 1 second to answer the poll below, and please leave a comment 👇👇

Good morning; here's what the Oilman has for you today:

• U.S. Debt Default Could Never Happen, Right?

• What To Do With Windfall Profits?

• Tweet of the Day

U.S Debt Default Could Never Happen, Right?

Oil prices fell on Tuesday even though the API estimated an inventory decline of over 6 million barrels.

Why?

Because it’s debt ceiling negotiation season again, and things are not looking good.

The shadow of debt default spreads its wings again

Every time Congress starts arguing about the debt ceiling, analysts crawl out from under all sorts of rocks to predict debt default and devastation.

It’s not just analysts, either.

Here’s what the Treasury Secretary had to say about a possible default:

"A default on our debt would produce an economic and financial catastrophe," Janet Yellen said Tuesday.

"A default would raise the cost of borrowing into perpetuity. Future investments would become substantially more costly."

Wow. When a Treasury Secretary starts talking gloom and doom, you know things are bad, right?

Good thing a default has never happened before, right?

…Accept the four times it did happen.

But on the off chance that it happens (again)...

Oil will plunge like it hasn’t plunged since Covid. This is the demand destruction theory.

However, oil’s price could skyrocket in the event of a debt default. That’s what Josh Young sees happening, with demand only falling due to prolonged high prices.

Reports from Capitol Hill suggest disagreements between the parties run deep.

Republicans have proposed combining a spending cuts plan with a raise of the debt ceiling, but Democrats have already signaled they’ll reject it.

Unless an agreement is reached soon, the default could become a fact by June.

And oil demand will drop off a cliff as everything becomes more expensive.

Consumer sentiment is already too low for comfort. Imagine where it will go when mortgage rates and other credit costs soar.

There’s no production cut that OPEC could make that would prop up prices if that happens.

Fortunately, it’s really unlikely to happen.

After all, it has never happened before…except for those times it did.

Today's Edition is Brought to You By Energy Builders Podcast

Get an inside look at the entrepreneurs making waves in the industry and learn from the drillers and deal-makers who know how to make a profit in the field. Don't miss out on this action-packed listening experience – tune in to Energy Builders now and discover the secrets of success in the oil and gas business.

Listen on Apple Podcasts, Spotify, and more.

What To Do With Windfall Profits?

It’s profit-reporting time again, and the biggest names in oil are expected to book robust results yet again.

But this time, it will be refining that will drive their bottom lines higher.

Mild winter, low prices, slimmer bottom lines

The mild winter in most of the northern hemisphere pushed down the price of both oil and gas.

This means Exxon, Chevron, and their peers will report lower earnings for this year’s first quarter.

Yet “lower” does not mean “worse.”

Not this time.

Because this time, the majors have clung to the extra money they made last year from the war-driven price spike.

This time, the majors were smart.

And they also enjoyed resilient demand for the products they make at their refineries.

Demonized or not, the oil industry is looking strong and healthy. Environmentalists won’t like that, but such is life.

It may also be ready for some M&A action.

Windfalls equal acquisitions

Thanks to their disciplined approach to the massive profits they booked last year, the majors are now in a perfect position to consolidate the industry.

A string of recent deals certainly suggests there’s more appetite for mergers and acquisitions.

The report about Exxon’s potential intentions for Pioneer really made a splash.

And there may not be a lot of time left to make the best of shale.

"If shale oil is becoming long in the tooth and you can’t deliver enough production growth organically. You may see some firms looking for growth via acquisition," said one equity analyst from CFRA.

Not everyone buys the “peak shale” argument. Actually, many don’t.

But when you’ve got so much money, and you want to be cautious with new investments, what do you do?

You go shopping, of course.

Around the Global Patch

🇪🇺 EU's new emissions policy sends shockwaves through industry.
🇦🇺 Australia's bold move to cap prices till 2025 revealed.
🇧🇷 Brazil's mega pipeline tender sets stage for Equinor's pre-salt sequel.

Tweet of the Day

Thanks for reading today's Oil Patch!

Stay oily, my friend.

Two quick requests before you go:

• If you found this useful, forward this email to a friend to spread the word. 👇

• Take 1 second to answer the poll below, and please leave a comment 👇👇