How would Rockefeller treat the pessimism in the oil fields?
*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed or registered financial expert. Please see a financial advisor before making investment decisions.
This blog post will be an opinionated one where I talk about how I see John D. Rockefeller, the biggest oil tycoon in history, handling the extreme pessimism in the energy sector
With global economic activity plunging due to the government instituted lockdowns, oil prices have plunged a lot ever since. On the day of writing, WTI Crude futures have doubled after hitting negative territory during the day. These rough conditions in the oil fields have made it hard for drillers to make a profit and make investors pessimistic about the whole energy sector. Even though shale drillers have much lower costs per barrel than drillers that employ other strategies, because of the low oil prices, shale drillers can't even pay bills. Also, because the fracking boom has exploded, the oil fields are filled with companies that are structurally unprofitable as fracking is an unprofitable business practice.
Now, for those that don't know, hydraulic fracturing allows drillers to obtain tons of oil in the beginning and the amount of oil they obtain as years go by decreases rapidly.
John D. Rockefeller has been well-known for founding the oil monopoly Standard Oil and for employing anti-competitive tactics against his competitors. Tactics like providing the lowest profits until his competitors bankrupt are one tactic he is most well-known for. This tactic plays really well for Rockefeller as oil prices are really low today.
As the "nuclear bomb" (the plunge in oil prices) kills many players in the oil fields, what would Rockefeller do?
This blog post will be an opinionated one where I talk about how I see John D. Rockefeller, the biggest oil tycoon in history, handling the extreme pessimism in the energy sector
With global economic activity plunging due to the government instituted lockdowns, oil prices have plunged a lot ever since. On the day of writing, WTI Crude futures have doubled after hitting negative territory during the day. These rough conditions in the oil fields have made it hard for drillers to make a profit and make investors pessimistic about the whole energy sector. Even though shale drillers have much lower costs per barrel than drillers that employ other strategies, because of the low oil prices, shale drillers can't even pay bills. Also, because the fracking boom has exploded, the oil fields are filled with companies that are structurally unprofitable as fracking is an unprofitable business practice.
Now, for those that don't know, hydraulic fracturing allows drillers to obtain tons of oil in the beginning and the amount of oil they obtain as years go by decreases rapidly.
John D. Rockefeller has been well-known for founding the oil monopoly Standard Oil and for employing anti-competitive tactics against his competitors. Tactics like providing the lowest profits until his competitors bankrupt are one tactic he is most well-known for. This tactic plays really well for Rockefeller as oil prices are really low today.
As the "nuclear bomb" (the plunge in oil prices) kills many players in the oil fields, what would Rockefeller do?
"The time to buy is when there's blood in the streets"
This is a famous quote by Baron Rothschild. Especially in a time like this where there's a lot of blood in the field, the oil baron John D. Rockefeller would most likely use his huge cash reserves to buy out many of his competitors for really attractive prices. Since many of those shale companies have access to attractive lands for drilling, Rockefeller will be able to acquire access to those lands for a huge discount. Also, when acquiring those companies, he'll also be getting the equipment and other assets that come with his purchase of those businesses.
Now one concern anyone looking to buy any oil company will be the debt. By buying the shares of the companies at a steep discount and having the business undergo bankruptcy, which relieves the business of its debts and possibly resurrect, Rockefeller won't have to worry about the huge debt load many energy companies hold. Pretty much, Rockefeller is being portrayed as a vulture investor.
Overall
If Rockefeller were here today and saw the things happening in the oil fields, he'd most likely take advantage of it and strengthen his oil empire. As an entrepreneur, something you should learn is that many of the monopolists from the industrial revolution and even earlier would position themselves to be the strongest among its peers and then make their industry conditions very difficult in order to weaken their competitors a lot. That way, they can acquire their competitors for a steep discount or even eliminate their competitors and capture their territory.
Think about the banking barons that artificially lowered interest rates in order to make their competitors lose profits or the monopolists in the farmlands that lowered commodity prices to bankrupt their competitors.
Invest wisely and be careful as these times are really volatile.
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