Many experts believe that today’s crisis is similar to the oil crash in 1986. “Defaults are skyrocketing again.” In December, exploration and production company defaults topped 11%, up from just 0.5% the previous year, according to Fitch Ratings.
“Energy companies borrowed a lot of money when oil was worth over $100 a barrel.” “The returns seemed almost guaranteed if they could get the oil out of the ground.” However, oil now is barely trading above $30 a barrel and companies can’t pay back their debts.
The last really big oil bust was in the late 1980s. “Now the Saudis (and other members of OPEC) are in a battle with the United States, which has become a major player again in energy production.”
No one wants to cut back on production and risk losing market share.