The Oil War Is Only Just Getting Started

It’s been a month now that investors and analysts have been closely watching two main drivers for oil prices: how OPEC is doing with the supply-cut deal, and how U.S. shale is responding to fifty-plus-dollar oil with rebounding drilling activity. Those two main factors are largely neutralizing each other, and are putting a floor and a cap to a price range of between $50 and $60.

The U.S. rig count has been rising, while OPEC seems unfazed by the resurgence in North American shale activity and is trying to convince the market (and itself) and prove that it would be mostly adhering to the promise to curtail supply in an effort to boost prices and bring markets back to balance. In the next couple of months, official production figures will point to who’s winning this round of the oil wars.

This would be the short-term game between low-cost producers and higher-cost producers.

In the longer run, the latest energy outlook by supermajor BP points to another looming battle for market share, where low-cost producers may try to boost market shares before oil demand peaks.

BP’s Energy Outlook 2017 estimates that there is an abundance of oil resources, and “known resources today dwarf the world’s likely consumption of oil out to 2050 and beyond”.

“In a world where there’s an abundance of potential oil reserves and supply, what we may see is low-cost producers producing ever-increasing amounts of that oil and higher-cost producers getting gradually crowded out,” Spencer Dale, BP group chief economist said.

In BP’s definition of low-cost producers, the majority of the lowest-cost resources sit in large, conventional onshore oilfields, particularly in the Middle East and Russia.

Although this view that low-cost producers would try to seize more market share comes from an oil major with significant interests in Russia and Iraq, for example, BP may not be wrong in predicting that the abundance of oil resources would prompt the lowest-cost producers to pump the most out of low-cost barrels before the world starts to unwind from too much reliance on oil.

Oil demand growth is expected to slow down in the years to come. BP pegs the cumulative oil demand until 2035 at around 700 billion barrels, “significantly less than recoverable oil in the Middle East alone“.

Middle East OPEC production growth would account for all OPEC output growth by 2035, BP reckons, noting that other OPEC production typically has a higher cost base and its market share would drop.

The U.S. liquids production is expected to rise by 4 million bpd to 19 million bpd by 2035, with growth mostly in the first half of the period, driven by tight oil and NGL output.

So, both OPEC’s Middle East members and the U.S. are seen increasing oil and liquids production in the next two decades.

However, OPEC – especially Saudi Arabia – has the recent bitter experience of its pump-at-will policy for market share backfiring on its economy when oil prices crashed.

Another market-share war would involve too many unknowns, including supply-demand basics, leaner and meaner non-OPEC producers, oil price effects on oil-revenue-dependent economies, or rationale for investments in higher-cost areas.

OPEC’s decision to deliberately cut supply and abandon the strategy of pursuing market share at all costs is currently benefiting the cartel’s competitor, U.S. shale.

Commenting on OPEC’s current and future relevance and influence on the oil markets, Wood Mackenzie said in an analysis last week:

The group may still be able to control oil prices to a limited degree, but the benefits of that control will accrue to parties outside the cartel. If OPEC remains a functional entity by the end of 2017, its greatest hits will surely be in the past.

Five or ten years from now, a possible market share ‘oil war’ would take place on a totally different battleground, and some regiments or battalions may lack essential armory to wage such war.

Link to original article: http://oilprice.com/Energy/Crude-Oil/The-Oil-War-Is-Only-Just-Getting-Started.html

By Tsvetana Paraskova for Oilprice.com


The Top 5 Places To Work In U.S. Oil And Gas

Anadarko Petroleum and Chevron have emerged as the top two employers in U.S. oil and gas, according to a survey conducted by the job site Indeed. The top five for the industry was completed by Plains All American at #3, Occidental Petroleum at #4, and Noble Energy at #5.

Indeed said that it ranked companies based on a number of factors but generally speaking, the better the site visitor ratings and reviews a company had, the higher it ranked on the “Best Places to Work” list.

The site has 200 million unique visitors monthly, lending credibility to its findings. The reviews and ratings it collected to compile the rankings included postings from current and former employees.

These, in the case of Anadarko, Chevron, and the rest of the best, praised the companies for their corporate culture, the compensation they received, the attractive work/life balance offered by the employer, and the good working environment, including additional training opportunities.

Besides praise, however, there was also criticism. For Anadarko, the reviews quoted by Oil and Gas 360 in the release of the survey seemed to focus on the management style that the employees were not particularly happy with. For Chevron, unsurprisingly, the “Cons” side of the reviews referred to the massive layoffs – 8,000 as of last April.

According to Indeed data, the number of new oil and gas job postings had inched up at the end of 2016, after taking a dive for most of the year, with sector players struggling to adjust to the new oil price environment and focusing on cost cuts, which are more often than not incompatible with new hiring or even employee retention.

This may change if the adjustment proves successful, and it seems there is a ready pool of former workers that are ready to return. A study by the University of Houston has found that about 60 percent of laid off oil and gas employees – out of 720 respondents – are still out of work. The study is ongoing, so the figures are not final, but for the time being they look promising for those who may want to start hiring again.

Others, however, have found new employment outside the energy industry, the study’s authors said, with just 13 percent of the sample finding new jobs in oil and gas. Those that defected to other industries may not return to oil and gas when the hiring environment changes, and one of the authors notes that this could turn into a problem for oil and gas employers.

The problem, Christiane Spitzmuller goes on to say, would translate into higher recruitment and training costs. These will need to be added to higher drilling and maintenance costs as oilfield service providers get to call the shots now that oil is a bit higher and E&Ps are ramping up production.

The potential hiring problem is aggravated by sentiment among former employees. According to the University of Houston study, over 70 percent of respondents said they were nervous about the future of the industry, with some 55 percent planning to leave oil and gas for good.

This is perfectly understandable in the context of some 215,000 layoffs in U.S. oil and gas – the same could occur during the next price crash. Still, energy companies could still lure at least some employees back, if they can keep up the benefits that made Anadarko, Chevron and Plains All American “Best Places to Work.”

Link to original article: http://oilprice.com/Energy/Energy-General/The-Top-5-Places-To-Work-In-US-Oil-And-Gas.html

By Irina Slav for Oilprice.com


Can Oil Markets Survive An OPEC Implosion?

A technical meeting that was supposed to iron out some wrinkles for a deal to cut oil production ended in acrimony over the weekend, and OPEC’s effort at coordination could be at yet another impasse.

Following the Algiers agreement at the end of September, a tentative deal that called for a collective reduction in oil output in the range of 200,000 to 700,000 barrels per day, OPEC scheduled a meeting on October 28-29 in Vienna to put some meat on the bones of the pact so that it could be officially sealed at the end of November.

But after weeks of papering over differences between its members and trying to put some positive spin on the prospects for a deal, OPEC not only failed to agree on individual production quotas, but its members also bickered over data and even which countries are supposed to participate. The group spent two days negotiating, and came away with nothing more than a statement that said they would continue talking.

The biggest hang up at this point is Iraq, which has two fundamental complaints. First, Iraqi officials dispute the data being used to calculate its oil production levels, arguing that the sources OPEC is using for its official estimates are underestimating Iraq’s output. That would hamstring Iraq more than it feels is fair, forcing it to cut deeper under the deal.

More importantly, Iraq is demanding an exemption from the deal entirely, arguing that it should be allowed to produce as much as possible because of its costly war against the Islamic State. Iran, Nigeria and Libya have been granted exemptions, due to the effect of sanctions (Iran) and disrupted supply because of security issues (Nigeria and Libya) – Iraq wants the same treatment.

That resulted in some friction at the Oct. 28 gathering in Vienna, a meeting that reportedly stretched on for 12 hours. As the WSJ notes, the success of this type of agreement at the end of November tends to require a consensus from lower-level officials ahead of time, something that did not occur this past weekend. That casts some serious doubt on the viability of the overall deal. On Oct. 29, another meeting with non-OPEC producers such as Brazil, Russia, Azerbaijan, Mexico, Oman and Kazakhstan, also ended with very little progress and zero commitments. Moreover, non-OPEC countries will have little impetus to offer any concessions if OPEC itself cannot come to terms. Russia said upfront that it would not cut its production, and it would only freeze if OPEC agreed to cut first.

The challenges standing in the way of the deal were evident right after the Algiers announcement at the end of September. Getting all members on board for a production cut was always going to be an uphill battle. But after this weekend, the odds of a deal look increasingly grim. “It’s more likely that OPEC will come away with no decision in November than that they’ll reach an agreement,” Fabio Scacciavillani, chief economist at the Oman Investment Fund, told Bloomberg on Oct 30. “If they are able to agree, it will likely be a wishy-washy deal that’s hobbled by too many exemptions.”

With competing interests, the discord seen over the weekend in Vienna was somewhat predictable. And the results of the fallout are predictable too: oil prices dropped more than 1 percent on Monday during early trading, with both WTI and Brent dipping below $50 per barrel and dropping close to one-month lows. Hedge funds and other money managers cut their long positions on oil futures and increased short bets for the week ending on October 25, a sign that the markets are losing confidence in a deal. “The price balloon is deflating in response to increasing doubts that OPEC will deliver a credible agreement on production control,” David Hufton, CEO of brokers PVM Group, told Bloomberg. “The combined OPEC and non-OPEC dance rhythm is one step forward followed by two steps back.”

In fact, the chances of a deal might deteriorate even further in the remaining days before the official meeting at the end of November. OPEC likely increased oil production in October, which would require even steeper cuts than they previously laid out. That could put a deal of any significance entirely out of reach.

By Nick Cunningham of Oilprice.com

Link to original article: http://oilprice.com/Energy/Oil-Prices/Can-Oil-Markets-Survive-An-OPEC-Implosion.html


OPEC’s Output Freeze: What Has Changed Since Doha?

It’s possible that OPEC is crying wolf with hints of an output freeze next month in Algiers; but it’s also possible that they are ramping up production to take the sting out of a freeze. This is a delicate balancing act that the Saudis need to play very carefully.

The official chatter is that the OPEC meeting in Algeria from September 26 to 28 could conclude with an agreement to freeze production by the member nations, with even Russia joining forces in a freeze that may prevent further oil price erosion. But everyone’s a bit gun-shy after the false hopes of the last round in Doha—even if a freeze at levels that existed then wouldn’t have meant much either—and it’s hard to blame them. The question is, how many times can the Saudis cry wolf without forever losing the ability to leverage this chatter to affect a rise in oil prices?

But lets rewind a bit to the nature of the recent chatter. The Saudi Energy Minister has indicated that Saudi Arabia, OPEC’s largest producer, is willing to proceed with a production freeze.

“We are, in Saudi Arabia, watching the market closely, and if there is a need to take any action to help the market rebalance, then we would, of course in cooperation with OPEC and major non-OPEC exporters,” said Saudi Energy Minister Khalid Al-Falih, reports Reuters.

“We are going to have a ministerial meeting of the International Energy Forum in Algeria next month, and there is an opportunity for OPEC and major exporting non-OPEC ministers to meet and discuss the market situation, including any possible action that may be required to stabilize the market.”

The hopes of reaching an agreement in Doha were scuttled by Saudi Arabia, because it wanted its arch rival, Iran, to participate in the freeze. Unfortunately for oil prices, Iran had made it clear that it would not join any such discussion until they reached pre-sanction levels of oil production.

What has changed from Doha to Algeria?


Iran’s oil production is close to its pre-sanction levels, meaning that its first cited prerequisite for any discussion has now been met—a criteria that was not met at the time of the Doha meeting. In addition, increasing oil production further by Iran is a big ask—it would need billions of dollars worth of investments in both upstream and downstream facilities to make this happen. With oil prices languishing below $50 a barrel, major oil companies are reluctant to commit huge sums of money for new oil projects.

Iran’s oilfields are mature, and more than half of its wells have an annual decline rate of 9 percent to 11 percent, according to Michael Cohen, an analyst at Barclays in New York. Therefore, at their existing production levels, they need an additional 200,000 to 300,000 barrels a day annually to replace the shortfall from their aging wells.

Iran needs more money and investment to continue pumping at the current rate, making it more likely for Iran to agree to some kind of an arrangement where they continue to pump oil at a rate close to their target of 4 million barrels a day.

That said, the last thing that Iran wants is to be sidelined, so Tehran is bound to make its presence felt at the meeting with strong statements. But at the end of the day, it is unlikely that Iran will scuttle an agreement where it has everything to gain and nothing to lose.

“There may be a little bit more to it this time. I’m still very skeptical, but it’s just with Iran being where they are production-wise, they’ll be more inclined to eventually go along with a deal,” said Again Capital’s John Kilduff, reports CNBC.

Saudi Arabia

The oil-rich nation underestimated the resilience of the U.S. shale oil drillers when they declared war on them in 2014. American oil has not only kept flowing—the shale producers have managed to bring down production costs considerably. This ability was not anticipated by Saudi Arabia.

Meanwhile, Saudi Arabia has burned more than $175 billion in reserves since August 2014. The Saudis have introduced austerity measures and plans to monetize their crown jewel Saudi Aramco to survive the oil downturn. Nevertheless, things are not going well for this nation, which youth is struggling to find jobs as shown in the chart below.

IMG URL: http://cdn.oilprice.com/images/tinymce/2016/Oil%20Graphs%201.png

A large population of unemployed youths who cannot take care of their families can sow seeds of frustration, and the Arab Spring will still be fresh in the memory of the rulers.

Saudi Arabia is struggling to grow in this oil downturn. Barring the 2009 dip, the current growth rate of 1.5 percent is the worst in a decade, according to data compiled by Bloomberg.

IMG URL: http://cdn.oilprice.com/images/tinymce/2016/Oil%20Graphs%202.png

If oil prices remain low, the Saudi plan to sell shares in Saudi Aramco might not fetch them the valuations they expect, and a nation that cannot provide the most basic of amenities—food for its foreign workers—says a lot about their financial condition.

Saudi Arabia has seen the recent slide in crude oil prices towards the $40/barrel mark, which could have gone deeper without the chatter of a production freeze. And since they have already cried wolf once in Doha, doing so again in Algiers decrease the importance of any ‘chatter’ leverage they have in the future.

Rest of the nations already onboard

Barring Iran and Saudi Arabia, the rest of the nations were in agreement about the need to freeze production during the Doha meeting.

From OPEC to Russia, everyone is at record production levels

The oil-producing nations want to ensure that even if there are talks of a production freeze, they should not feel the pinch. Hence, even before the meeting, they will try to produce more, rather than less. The recent ramping up may very well be an indication that a freeze—although at a level higher than what would have likely come out of the Doha meeting—may be on the horizon.

The oil markets are so sensitive that even a statement of agreement by OPEC at the end of the meeting is enough to send oil prices flying above the resistance level of $51 a barrel.

What about the shale oil producers?

Though U.S. production is declining and experiencing a flurry of bankruptcies, the remaining companies are much better positioned to continue pumping at lower levels to survive the downturn.

Though the risk remains that the shale oil drillers will come back in full force when oil prices recover, the risk is worth taking. OPEC and Russia have realized that any new world order will have to include the shale oil companies. They are a large enough force not to be neglected or defeated.

With all of this in mind, an agreement between OPEC and Russia is more feasible in Algiers than it was in Doha. It might not mean much though, with output levels soaring ahead of the meeting. A freeze at current levels—or levels reached by the time of the meeting—won’t do much to change the fundamentals, nor is there any indication that a freeze would have long legs.

Link to original article: https://oilprice.com/Energy/Energy-General/OPECs-Output-Freeze-What-Has-Changed-Since-Doha.html

By Rakesh Upadhyay for Oilprice.com


Surprise Natural Gas Drawdown Signals Higher Prices Ahead

The U.S. electric power sector burned through a record amount of natural gas in recent weeks, a sign of the shifting power generation mix and also a signal that natural gas supplies could get tighter than many analysts had previously expected.

The EIA reported a surprise drawdown in natural gas inventories for the week ending on August 3. The reduction of 6 billion cubic feet (Bcf) was the first summertime drawdown since 2006. Natural gas spot prices shot up following the data release on August 4, although they fell back again shortly after.

Natural gas consumption patterns are much more seasonal than for oil. Demand tends to spike in the winter due to heating needs, and then drops substantially in the intervening months, particularly in the spring and fall. Between March/April and October/November, natural gas inventories build up as people need less heating, and that stockpiled gas is then used in the next winter.

So it comes as a surprise that after a record buildup in inventories this past winter, the summer has seen a much lower-than-expected buildup in storage. And last week’s drawdown, the first in over a decade during summertime, says quite a bit about the shifting energy landscape. The EIA says this is the result of two factors: higher consumption from electric power plants, and a drop off in production.

The U.S. is and has been in the midst of an epochal transition from coal-fired electricity to natural gas and renewables, a switch that will take many more years to play out. But the effects are already showing up in the power generation mix. Utilities have rushed to build more natural gas power plants over the past decade, and now with so many online, demand for gas has climbed to new levels.

Just a few weeks ago, on July 21, the U.S. burned through 40.9 billion cubic feet, the highest volume on record, according to the EIA. And in late July, the power burn exceeded 40 Bcf/d three times due to a hot weather. Nine of the ten highest power burn days on record took place last month, with the other one occurring in July 2015. Average consumption of 36.1 Bcf/d in July of this year was 2.7 Bcf/d higher than a year earlier, and 1.5 Bcf/d higher than the previous high reached in July 2012.

IMG URL: http://cdn.oilprice.com/images/tinymce/2016/Nick0508A.png

The high rates of consumption from the electric power sector are contributing to tepid growth in inventories this summer. This comes on the heels of a massive buildup in inventories last winter, and heading into summer the expectation was that huge storage levels would keep natural gas prices at rock bottom levels, perhaps for years. But that doesn’t look like it will come to pass.

While high demand is keeping natural gas from being diverted into storage in large amounts, the other main reason that natural gas inventories are not building up as much as previously thought is because of a supply-side issue: natural gas production is actually falling after years of steady increases. Natural gas prices have traded below $3 per million Btu since the beginning of 2015. U.S. gas drillers continued to ratchet up production through 2015, however, creating this past winter’s inventory glut. But the resulting downturn in prices has now made drilling unprofitable in many areas. On top of that, the oil price crash has ground oil drilling to a halt, which means that the natural gas produced in association with oil has also come to a standstill. The upshot is that natural gas production is now falling in the United States. The Marcellus Shale, the most prolific shale gas basin in the country, saw production peak in February at 18.5 Bcf/d. Since then output has declined 3 percent. In August, the EIA expects gas production from the Marcellus to fall by another 26 million cubic feet per day.

IMG URL: http://cdn.oilprice.com/images/tinymce/2016/Nick0508B.png

Of course, this stuff is cyclical. The first summer drawdown in inventories in a decade means that natural gas markets are now tighter than many analysts thought only a few months ago. Falling production and rising demand could lead to steeper drawdowns in inventories this coming winter. The effect of that will be to push up spot prices, which could induce more drilling once again.

Original article: http://oilprice.com/Energy/Heating-Oil/Surprise-Natural-Gas-Drawdown-Signals-Higher-Prices-Ahead.html

By Nick Cunningham of Oilprice.com


Today’s Downturn Sets Markets Up For A Dramatic Oil Price Spike

Another oil price downturn threatens to deepen the plunging levels of investment in upstream oil and gas production, which could create a more acute price spike in the years ahead.

Oil and gas companies have gutted their capex budgets, necessary moves as drillers went deep into the red following the crash in oil prices. But the sharp cutback in investment means that huge volumes of oil that would have otherwise come online in five or ten years now will remain on the sidelines.

The industry will cut spending by $1 trillion through 2020, according to Wood Mackenzie. Those reductions are creating a “ticking time bomb” for oil supply. The consultancy projects that the market will see 5 million barrels of oil equivalent per day (mboe/d) less this year, compared to expectations before the collapse of oil prices. And next year, the industry will produce 6 mboe/d less than it otherwise would have had the spending cuts not been made.

This is creating the conditions for a supply crunch and a price spike. The reason is simple: demand continues to rise by some 1.2 million barrels per day each year, but supplies are no longer growing because of the spending cuts. That is not a problem today as production still slightly exceeds demand and high levels of crude oil and refined products sit in storage. But by as early as the end of 2016 the oil market could tip into a supply deficit. And because the industry has scaled back so intensely on capex, global supplies could fall short of demand for quite a while. The end result could be a dramatic price spike.

This scenario has been described before by Wood Mackenzie, which published an estimate earlier this year that put the total value of cancelled projects over the past two years at $380 billion, projects that would have yielded 27 billion barrels of oil and gas.

So far, the markets are not pricing in the brewing supply crunch. Oil prices continue to fall, and speculators have taken the most pessimistic position in months, selling off long bets and buying up shorts.

Oil analysts and forecasters do not see a rapid rise in prices either. A Bloomberg survey of 20 analysts revealed a median price forecast of just $57 per barrel in 2017. No doubt that record levels of inventories are on their minds – even if oil production itself flips into a supply/demand deficit, it could take years to work through storage levels.

“We’re looking at a market that’s still in a very slow process of rebalancing and we don’t think that you’ll get a sustainable deficit until the second quarter of 2017,” Michael Hsueh, a strategist at Deutsche Bank AG, told Bloomberg. “Those deficits are necessary to draw down global inventories, but that will still take until the end of 2018, it appears.”

But the swing from surplus to deficit could be more dramatic than many think. Now that oil is once again entering a bear market, with WTI and Brent dropping to $40 per barrel, the industry could be forced to slash spending even deeper than it already has, leaving even more oil reserves undeveloped. And in any case, it is possible that high storage levels and the two-year production surplus is leading to a myopic view of the future – just because the markets are oversupplied today does not meant that they will in several years’ time.

Wood Mackenzie says that while U.S. shale has been the hardest hit by the steep fall in investment, the shale industry will be the first to bounce back because of the short-cycle nature of shale drilling. The price spike will lead to a resurgence in shale, and Wood Mackenzie is predicting that shale production doubles from the 2015 high-watermark of 4.5 million barrels per day to 8.5 mb/d by the mid-2020s.

But that is a long way off for oil executives dealing with deteriorating balance sheets and rising debt levels.

Link to original article: http://oilprice.com/Energy/Energy-General/Todays-Downturn-Sets-Markets-Up-For-A-Dramatic-Oil-Price-Spike.html

By Nick Cunningham of Oilprice.com


The ‘Roads and Bridges’ Lie

By: Renee Nal | New Zeal

In order to restore the sovereignty of the states, Americans MUST demand that their state legislatures stop taking federal taxpayer dollars.

President Obama speaks about transportation infrastructure during a visit to the Tappan Zee Bridge

President Obama speaks about transportation infrastructure during a visit to the Tappan Zee Bridge

“From the beginning the constitutionality of appropriations for the construction of roads was warmly [adamantly] denied, and by none more steadily than by the successive presidents, Jefferson, Madison and Monroe. All of them refused to be convinced that the building of roads in different parts of the country was such a matter of ‘general welfare‘ as to justify the expenditure of the public moneys.” – American Political History, 1763-1876, Volume 1, By Alexander Johnston

During the financial crisis of 2008, Presidents George W. Bush and Barack Obama assured Americans that some banks were “too big to fail.” Hard earned tax payer dollars were immediately needed to be used to bail out banks and then, the auto industry.

President George Bush was famously quoted as saying,

“I had to abandon free market principles in order to save the free market system.” – George W. Bush

Read more here…


Predictions of a Trading Apocalypse Are Grossly Exaggerated

By Chris Knowles

Apocalípico I by Mauricio Garcia Vega (artist) – Source/Photographer Mauricio Garcia Vega. This file is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.

Apocalípico I by Mauricio Garcia Vega (artist) – Source/Photographer Mauricio Garcia Vega. This file is licensed under the Creative CommonsAttribution-Share Alike 3.0 Unported license. Obtained from Commons.Wikimedia.

The Sky is Falling!

There are dire predictions of a trading apocalypse if Britain acts in its best interests and leaves the EU. That is if the hysterical campaign to remain in that undemocratic and economically fragile political grouping is to be believed.

The doom and gloom Remain crowd are now wheeling out globalist after globalist to scare Brits into submitting to EU rule. The people behind pointless wars, biblical scale migrations, financial disasters and undermining cherished freedoms are currently on the march again.The latest of these political ‘celebrities’ is Presidential wannabe Hillary Rodham Clinton.

It is obviously very clear that the globalists who seek to oppress us defiantly want the us Brits to remain as inmates in the open prison also referred to as the European Union – with no prospect of reprieve or parole.

Continue reading


Oil Won’t Stage A Serious Rebound Until This Happens

Oil prices have shown signs of life over the past few weeks, as production declines in the U.S. raise expectations that the market is starting to adjust. As a result, Brent crude recently surpassed $40 per barrel for the first time in months.

A growling list of companies are capitulating, announcing production cuts for 2016. Continental Resources, for example, could see output fall by 10 percent. A range of other companies have made similar announcements in recent weeks. The energy world has been speculating about declines from U.S. shale, and the declines are finally starting to show up in the data.

Despite the newfound optimism that oil markets are balancing out, crude oil sitting in storage is at a record high in the United States. Energy investors may have preferred to focus U.S. production declines, or the fall in gasoline inventories in early March, but meanwhile crude oil stocks continue to signal that oversupply persists.

Continue reading



By Sharon Sebastian

It is rare that politicians step into the nightmare of shame that is today’s nursing home industry in an effort to protect the innocent and condemn an industry rife with greed and substandard care.

“Nursing homes are rapidly becoming nothing other than legalized scams…a place to ‘warehouse’ the elderly, suck away their money, treat them like children, let them die, and then take in another from the waiting list.” – Former Iowa State Senator Dennis Black

Senator Black’s lament reveals the desperation of families across the nation.

“It is hard for people to accept reality about people being abused. Out of sight, out of mind. Unless it happens to you, people do nothing about it. My experience has been extremely heart wrenching. I did not really know the man. He was not even a constituent. I just stepped in and tried to help.”

In a nation that prides itself on quality health care, first-hand investigations and extensive research reveal a shameful truth that must be brought out of the shadows. While embedded as a journalist for years in the elder care system from hospitals to nursing homes, what became evident was a broken system of care for families and their elderly loved ones. In a system where too frequently profits trump care, the results are ugly, inhumane and often deadly.

What the Iowa Senator details, in addition to deficient care, is a great moral collapse undergirded by greed in today’s America. The continuing degradation of the nursing home industry is forcing a crisis of conscience. Senator Black speaks of a man, a father, a grandfather and a U.S. veteran:

“America needs to know that he is but one of untold or unknown numbers of people who are being ‘farmed’.  They represent a certain amount of cash and assets, and are seen as such by the money changers who only see them as a cash crop. He was just a ‘throw-away’ person that this system of DHS [Department of Human Services] has deteriorated    to in Iowa and apparently across the nation. We allow our elderly to be placed in confinement in a nursing home at $6,000 per month, drain them of their life’s savings and assets, medicate them into a stupor of near comatose…” Sharon, I can’t go on with this. It brings back too much from my experience and memory. [But,] I can’t put it away, because my buddy is six feet underground, placed there without the truth being told.”

Senator Black continues:

“I am not broad-brushing the entire nursing home industry.  Readers know who the good and the evil are, for you have either experienced it with your elders, or had reliable verification of the travesties that occur to others. Frankly, I’ve been exposed to an epidemic of abuse that emanates from the fact that ‘the bottom line’ is the first statistic viewed by the management of these [nursing home] corporations… As always, the almighty dollar dictates.”

Families in every state across America feel abandoned as government policies fail to adequately regulate the multi-billion dollar nursing home industry. Contract fraud is rampant. An average of $5,000 is paid monthly for each resident’s care. Yet, the shortage of actual services rendered to patients often reveals a theft that would not be tolerated in other businesses. With no one taking account, nursing homes regularly cutback on staff, nutrition and supplies (such as toothpaste and diapers) in order to shave costs. Savings stolen from patient care are applied to bottom-line profits for the owners who are reaping a reported financial boon of billions of dollars during a down-economy. The average nursing home administrator’s salary is over $100,000 annually.

What would be condemned or prosecuted just outside of the doors of nursing homes goes unchecked once inside. Prosecution of abusers is rare to nonexistent in the majority of cases where people are subjected to physical harm. Physical assaults, mental taunting and emotional bullying occur regularly to frail, defenseless victims and go unpunished. America cannot consider itself a civilized society when our aging and fragile parents and grandparents are left in the hands of bullies and predators without protection or relief.

The first critical step is strict enforcement of the laws that are on the books, both financial and criminal. Closing down what some call “houses of horror” is another. Marjie Lundstrom of The Sacramento Bee reports that the California State Attorney General’s Office filed involuntary manslaughter charges against a nursing home in suburban Los Angeles: “Two registered nurses on staff also were charged with felony abuse. Public officials in neighboring South Pasadena continue to press the Attorney General’s office for criminal charges against another nursing home – a facility the local police chief denounced as a “cesspool” and a “community menace.”

What Senator Black and others may not know is that many nursing homes owners reward nursing home administrators with thousands of dollars in bonuses if they can get a four-or-five-star rating from State and Federal inspectors. Akin to the atrocities that have gone on in the Veterans Administration and its treatment of our veterans, nursing home managers have become adept at hiding the ongoing neglect and abuse during inspections. First-hand experience reveals that inspectors are easily fooled or choose to look the other way.

With a nursing home dependent on profits, a good rating from government inspectors, even when false, attracts customers and potential investors. To affect the bottom line or mollify stockholders, nursing homes cut services and care to increase profits. What is at stake is quality-of-life and, oftentimes, life itself. Prioritizing cost cutting over basic care is endemic throughout the industry. The result, according to Whistleblowers, is that people suffer or die. The good deserve credit, whereas the bad remain profiteering merchants of misery.

Every ten years a study comes out proclaiming that nursing home “care” is every bit as shameful as it was ten years prior. That pattern remains unbroken. Conditions   have worsened since U.S. Senator Charles Grassley (R-IA) wrote a letter to the U.S. Dept. of Health and Human Services over a decade ago after reviewing an investigation by the Office of the Inspector General. Senator Grassley complained that: “…facilities are given too many ‘free passes’ to correct deficiencies… Surveyors’ noted that in most instances a facility would, as an initial matter, correct the deficiency only to revert back to its “old ways” once a follow up review is completed.”

Grassley further adds and recent investigations reveal that surveyors state that: “…patients and/or family members are rarely interviewed; administrative and medical records are rarely reviewed; valuable information is routinely recorded incorrectly; and the word of the facility is often taken at face value over that of a resident and/or family member. As a result of these inherent procedural failures, complaints are rarely substantiated and serious quality problems are therefore not corrected. Despite years of reports, evaluations, and investigations, the surveyors that we interviewed portray a bleak and dismal situation in America’s nursing homes. The surveyors themselves are demoralized when blatant quality of care deficiencies and findings are watered down, substantively altered, and/or blatantly ignored or dismissed. These surveyors have raised enormously disturbing issues for anyone who cares a wit about the very health and safety of frail nursing home residents.”

Senator Grassley asserts that government ratings’ systems are unreliable and misleading since nursing homes are allowed to “self-evaluate” as part of the government’s five-star system of ranking. Families are unable to discern which are the good ones and which are bad.

Grassley denounces Medicare’s rating s as notoriously outdated and incorrect: “The concerns include questions about the integrity and reliability of the information provided to the public through the Nursing Home Compare [Medicare] website. A plan of attack is needed to restore the integrity of the system… The survey process, I am sure you will agree, is meant to improve the quality of care for residents, not to ignore it, gloss over it, and most of all, not make it worse. If the survey and certification process is not working–and it looks like it is not–it must be fixed.”

Owning and running nursing homes is based on a financially strategic decision where making a profit is central. Some open their doors to provide a decent service to meet a critical need. For others it is an ugly, get-rich scheme off the backs of families and our most vulnerable members of society. Dr. Charlene Harrington, has researched nursing home standards and regulations for more than three decades. I posed questions to Professor Harrington:

Q. How do nursing homes cut their operational costs? Is it by chronic understaffing, cutting supplies, and poorer quality meals?

A. There is really only one major way to cut costs and that is to cut staffing especially RN staffing since it is the most expensive.  The chains often have very low supplies and equipment and spend little on meals but they can’t go much lower on those [food] expenditures.

Q. If sufficient funds are paid [average $5,000 per month nationwide] and insufficient care is provided, is that fraud against the government and those paying thousands of dollars monthly per resident for the promised quality care that is most often advertised by these companies?

A. Yes, that is fraud and false advertising and there have been a number of legal actions on this, but unfortunately not enough to put the bad companies out of business.

The book, “Aging Warning: Navigating Life’s Medical, Mental and Financial Minefields details how widespread substandard care is and provides insight on how families can protect themselves and their loved ones medically, mentally and financially.

Nursing homes are licensed by the State to provide quality care and protection for their residents. As a care facility, they have a greater calling to decency, morals, ethics, kindness, and patience – in addition to appropriate levels of skill and training. Yet, the system is corrupt. A symbiotic arrangement exists between many in the billion dollar nursing home industry and politicians. Whistleblowers report that State and Federal politicians’ pockets are lined as lobbying occurs across party lines. Wealthy owners’ with deep pockets buy influence from both sides of the aisle to influence legislation favorable to the industry. Quality skilled long-term nursing facilities are an important part of the future. Along with families, ethical nursing home owners must demand a purging of the fraud and corruptness that permeates the industry.

Without the public holding government overseers accountable, conditions will continue to worsen inside nursing homes. Expect overcrowding, understaffing and the hiring of less skilled personnel handling more patients, including an increase of those with brain diseases such as dementia and Alzheimer’s. Our elderly and their families face a dismal future unless strict enforcement of criminal and civil laws inside of nursing homes becomes a reality nationwide.

Daily, people are being physically hurt, emotionally traumatized and bullied. The vulnerable must be protected. Ongoing suffering at the hands of predators must stop. A quality level of services must be rendered. The shame on this great nation will manifest itself as a grievous moral and financial crisis that could have been avoided — if only the warnings were heeded.

Take action. Email this article, and the links to this 3-part series posted below, to your representatives in Congress and the legislators in your state.

Related articles in series:  

Epidemic of Dementia: Shadow Economic Crisis (Part 1) by Sharon Sebastian

FDA and the Spread of Brain Diseases: Shadow Economic Crisis (Part 2) by Sharon Sebastian

Sharon Sebastian, author of the book, AGING: WARNING Navigating Life’s Medical, Mental & Financial Minefields,” is a columnist, commentator, and contributor in print and on nationwide broadcasts on topics ranging from healthcare, culture, religion, and politics to domestic and global policy. Sebastian’s political and cultural analyses are published nationally and internationally. Website:   www.AgingWarning.com