Greece has fallen from the headlines… but everyday life there is still a nightmare.

Regular readers know we’ve been closely following the financial disaster in Greece. For years, Greece spent more than it took in in taxes. This led to a financial crisis that looked like it might destroy Europe’s financial system.

The Greek government closed all banks in June to prevent people from withdrawing all their money and crashing the banking system. And it let Greek citizens withdraw only €60 ($67) of their own money each day from ATMs.

The country’s debt crisis ended (for now) earlier this month, when European authorities agreed to bail out Greece. This news calmed investors, but Reuters reports that things on the ground in Greece are still bad:

Greek banks are set to keep broad cash controls in place for months, until fresh money arrives from Europe and with it a sweeping restructuring, officials believe.

“Broad cash controls” means Greek banks are essentially frozen. Greek people can withdraw only €420 ($455) per week of their own money… and it looks like it will stay that way for months.

More from Reuters:

The longer it takes, the more critical the banks’ condition becomes as a 420 euro ($460) weekly limit on cash withdrawals chokes the economy and borrowers’ ability to repay loans.

“The banks are in deep freeze but the economy is getting weaker,” said one official, pointing to a steady rise in loans that are not being repaid.

One Greek farmer can’t get enough cash to run his business, Reuters says:

“It’s a nightmare. I owe many people money now – gas stations and firms that service machinery. I have to go to the bank every single day, and the money I can take out is not enough.”

•  Short on cash, Greek people have resorted to bartering…

Here’s Reuters:

A rising number of Greeks in rural areas are swapping goods and services in cashless transactions since the government shut down banks on June 28 for three weeks, restricted cash withdrawals and banned transfers abroad to halt a run on deposits and prevent a collapse of the banks.

“Bartering” means exchanging goods and services without using money. It’s how humans did business thousands of years ago. Bartering is extremely inefficient because you have to find someone who has what you want… and wants what you have.

Reuters reports how the Greek farmer is trying to survive the crisis:

Squeezed on all sides, the 41-year-old farmer began informal bartering to get around the cash crunch. He now pays some of his workers in kind with his clover crop and exchanges equipment with other farmers instead of buying or renting machinery.

Another farmer is trading cotton and wheat for bales of hay and machine parts, Reuters says.

This is a good reminder of something we stress often: the government controls any money you have in the bank. It can decide you’re not allowed to touch your own money at any time. Or it can put severe restrictions on how much money you can take out, like the Greek government is doing right now. And there’s nothing you can do about it.

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•  Speaking of crises, Shell is preparing for a “prolonged downturn” in oil prices…

Royal Dutch Shell (RDS-A) needs to save billions of dollars to survive what it calls “challenging times for the industry.”

Shell is the largest publicly traded oil company in the world that is not owned by the Chinese government. This year, the company plans to lay off 6,500 workers. It will also cut investments by $7 billion.

Shell’s CEO said these cuts are necessary because “today’s oil price downturn could last for several years.”

This is a significant shift in Shell’s outlook. In April, Shell forecasted that the oil price would bounce back up to $90 by 2018. A barrel of crude currently costs $48, down from $116 last June.

The crash in oil prices has slammed Shell’s stock. Its most widely traded shares, called “B shares,” are down 16% this year.

•  Shell is just one of many big oil companies making huge spending cuts…

This week, Chevron (CVX) said it will eliminate 1,500 jobs. Chevron is the second-largest US oil company.

ConocoPhillips (COP), America’s fifth-largest oil company, has already cut 1,000 jobs. It laid off 5% of its workforce because it expects “lower, more volatile prices.” Conoco’s CFO says the company plans to make more job cuts.

Oil services companies like drillers are feeling the pain, too, according to Bloomberg:

Job cuts at exploration and production companies have accounted for roughly 10 percent of the more than 150,000 layoffs globally throughout the industry, according [to] Graves [& Co.]. That compares with more than 100,000 eliminated from service providers and drilling contractors.

Bloomberg also says that oil companies are cancelling projects:

In addition to reducing their workforces, oil companies are “winding back” investments, consultant Wood Mackenzie Ltd. said this week, estimating they have canceled or delayed $200 billion of projects since mid-2014.

…and more job cuts could be on the way:

Industrywide cuts announced so far may not be enough. Even after saving billions of dollars in the first half, BP [British Petroleum] continues to spend more on capital investments and dividends than it generates from operations and asset sales. Chevron and Total also posted negative cash flow in recent quarters. Shell, while generating enough cash to cover investments and dividends, has a thin cushion

Big oil companies are trying to cut expenses so they don’t have to cut dividend payments to shareholders. Dividend cuts typically scare shareholders and cause them to sell.

That’s the last thing these big oil companies can afford right now. BP’s stock is down 23% over the past 12 months. Chevron and Shell have fallen 27% and 32%, respectively. Conoco’s share price has slid 36%.

Chart of the Day

Today’s chart compares announced job cuts in the US energy sector with the price of crude oil. US energy companies have already announced more job cuts in 2015 than they did during the past three years combined.

This data shows job cuts across the whole energy sector, not just the oil sector. As regular readers know, oil is just one of many energy commodities hurting right now. Natural gas prices are 25% lower than they were a year ago. And coal prices have fallen 15% since last July.

As you can see, the number of energy job cuts has exploded with the drop in oil prices.


Justin Spittler
Delray Beach, Florida
July 31, 2015