A Toxic Big Oil Market Storm?

I was watching Bloomberg's In The Loop with Betty Liu this morning and they were doing a piece on Big Oil and BP featuring a hedge manager's view of what is going on in that market that I found a bit interesting, the video isn't up yet but what piqued my interest had already been covered in Bloomberg Businessweek the other day:

Jim Chanos, the hedge-fund manager who made money betting against Enron Corp., said he is short- selling shares of large oil companies because investment in drilling and exploration is eating up their cash flows.

The founder of Kynikos Associates Ltd. said in a Bloomberg Television interview from his office in New York that his bearish calls on “some” energy companies, which he declined to identify, pre-date the April 20 explosion of the Deepwater Horizon in the Gulf of Mexico. That incident led to the largest oil spill in U.S. history and sent BP Plc shares down 49 percent through yesterday.

“If you look at their cash-flow statements relative to their income statements, you will see companies that haven’t replaced reserves in years, and haven’t seen any increase in revenues in years,” he said. “They’re borrowing their dividend. They’re in effect liquidating.”

Now, I am not much on the stock market as a whole, but bearing in mind that he did not disclose the actual Big Oil companies he was shorting - BUT as the reporter on In the loop had said that (major league paraphrasing here) "it would be up to financial reporters to go look at the financial statements to find out and clarify this for the viewers because that was their jobs" - and that Chanos plans to short these stocks pre-dates the disaster and does not include any activity on BP's stocks [video from another interview covering same material].

But it strikes me that this volatile mix of Big Oil "liquidating" coupled with hedge fund managers playing the game of shorting (now that Chanos is doing it and Bloomberg is reporting on that fact how many others might bandwagon on this game?) I have got to wonder:

Is this a toxic market disaster in the making?

Yes, I know that the market is volatile because of their winner-takes-all attitudes but it almost seems like a means to destroy a company, a sort of financial terrorism, if enough people acted on this, in a coordinated effort or not. Never mind that while one hand of an investor or is giving you a tip to short or buy or sell or whatever... The other hand of that same investor or tipster, all Kramer like, may be soaking you by doing the exact opposite.

And regardless of whether or not any of that is the case, the fact that Big Oil Corps are dumping all of that money into "Drill baby, Drill!" as fast as they can only magnifies the total lack of responsibility they have shown in investing in safety and to try and protect the workers and the environment when you consider the safety rules BP routinely short cut to save money (I bet BP isn't the only one routinely being ethical zeros to keep the money rolling) and that the technology (is useless floating orange stuff laid out improperly and clearly only for visual effect really technology?) they use for protecting the environment and cleanup is pitiful in comparison.

A little video on the floating orange stuff (efin' Boom! as fishgrease calls it and it is not safe for work but imperative that you watch this video - or read the profanity laced piece titled "Booming 101" here - to understand what I am talking about) put out there for the news cameras and so politicians and probably even some "small people" will actually see Big Oil looking like they are doing something about the gulf gusher, even if they are not doing anything useful because they aren't doing it right:

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I think you should look at the statements from the point of view of the availability of cheap oil colliding with peak oil. Given the secrecy surrounding Cheney's energy task force meetings, it's a rather safe assumption we passed the peak prior to the invasion of Iraq.

Just based on Jerome a Paris' past diaries.