Trump Says He'd Use Tariffs If Needed to Protect Oil Industry

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10. Oil Game Continues

This is only a weak attempt to try and keep the shale oil people from going total belly up and causing lots of banks, bond holders and stock holders to take a huge hair cut. What people don't seem to realize is that there's a lot of money tied up in oil development; oil price goes up, stock market goes up.

In the long term, oil is not sustainable. The working model is find a large oil deposit, estimate its size in recoverable oil, go to bank and stock market with oil estimate multiplied by the projected price (to estimate a value of the deposit), take out loan/float bonds/sell stock to raise capital, use capital to develop oil field, sell oil to pay back bond/loan holders and stock dividends and find or buy new oil deposits. This model only works if oil generally increases (because of general inflation and the increased cost in developing more marginal oil deposits).

We're seeing an accelerated breakdown in this model on the supply side since counties like Saudi Arabia and Russia depend so much on the oil revenue streams that any slight price drop makes them increase production to keep their incoming revenue the same; Saudi Arabia being in a luke warm war with Iran doesn't help either side's finances. The US oil industry is now in a serious bind because the price is now a fraction of their cost to produce. Thus the orange one's attempt to broker a deal (which will fail given his track record).

Long term, the advent of electric cars is going to doom big oil. No one know really knows when electric starts to replace the ICE but it's bound to happen in the next decade or so. This situation is analogous to coal's demise over the last 10 years. Right now big oil is doing their best to push the levers of government in their favor. We just need to remind the Hayek Libertarian arm of the Republican party that Trump's play is contrary to their laissez-faire principles (ha ha, I crack myself up).