Good and Bad of $50 Oil

 1/9/2026

The Good and Bad of $50 Oil

 

 Trump is getting more desperate over the mid-term elections. He promised lower gasoline prices. Trump 2.0 saw $78 oil in January. Today it trades around $58.  He boasts of 30 to 50 million barrels of Venezuela oil for the US.   But there is no lack of oil in the US.  The Venezuelan oil is heavy ala Mayan or Mexico crude and harder to refine.

Trump does not think diplomatically. He thinks in terms of business deals. I spend money arresting Maduro, I get paid for doing so. Break-even for US producers is about $60. At $50 it just does not pay to drill baby drill.

Major oil companies plan extensive layoffs.  Chevron plans to lay off as many as 8,000. This year. Conoco Phillips plans to reduce its work force 25% or about 3,000. Those are good paying jobs. What will the laid off workers then do?  Welcome to the boom and bust cycle once again. Yes, consumer spending will rise with decreased gasoline prices. But that is offset with job loss in the producing and energy service sector.

Halliburton is up 50% since October. At $32 it looks fully priced. The same is true for Patterson up from $5.20 to $7.00.

The stock market is up because the social mood towards stocks remains strong. Never mind the faltering Chinese economy, the Venezuela-Cuba mess, the striking farmers in France, and don’t forget Iran.  Today;s job report indicated a mere 60,000 new jobs. That falls below replacement for jobs eliminated in retirement. There is not a single investment bank in the US bearish on the market. After a parabolic rise it is all blue skies ahead. The same is true for luxury real estate prices in Aspen and Miami. In Miamin $100M + sales are common.

Snatching Maduro was easy relative to replacing his entire regime. Mexico has an uneasy relation with its cartels. In Venezuela, the government and the cartels are one and the same. Neither will go quietly.

Seasonally stock rise from December to May. On a short term basis, stocks top January 10 and bottom ideally January 23, two weeks hence. Markets are over-extended so that would be a welcome relief correction. For now that is my position.

Silver had outpaced gold with a 175% rally this year.  A correction is due but it is still not happening. Gold did not match the silver rally but is also at the end of a parabolic move.

Interest rates and bond prices remain in a sideways pattern.  The FED has begun QE 5 buying bonds and increasing its balance sheet. This injects money into the economy and presumably increases buying power.  This is Powell’s attempt to please Trump. But Trump seems bent on replacing Powell with a chosen puppet.

Dennis.elam@att.net