Economy
Related: About this forumWhat Was Russia Thinking In Refusing To Cut Oil Production? (Forbes)
Forbes
EDITORS' PICK |Mar 8, 2020,06:00pm EST
What Was Russia Thinking In Refusing To Cut Oil Production?
By Robert Rapier
Last week OPEC conducted meetings with a coalition of partners that have worked together to limit oil production since 2016. It was widely reported that the group hoped to come to an agreement to reduce oil production by an additional 1.5 million barrels per day (BPD)...one of the key partners of the coalition, Russia, refused to participate in additional cuts. They had previously signaled their resistance to additional production cuts in February when OPEC floated the idea.
... the global coronavirus (COVID-19) outbreak has forced the issue. Now, instead of having to deal with the addition of another million BPD of U.S. shale every year, suddenly they had to cope with millions of barrels of excess oil on the market as demand collapsed in response to the coronavirus outbreak.
So, Russia is effectively revisiting the 2014 strategy of defending market share. Saudi Arabia, in response to Russias decision, made the biggest cuts to the price of its crude oil in more than 30 years. Aramco shares, in turn, fell below their IPO price for the first time.
The End Game
It is likely, in my view, that the endpoint will be similar to the last time this strategy was attempted. Oil prices could dip all the way into the $20s. Russia will probably eventually decide that the pain is too great, and come back to the table. In the interim, many shale oil producers will be forced into bankruptcy.
Meanwhile, a bigger existential risk looms for the global oil industry. Electric vehicles (EVs) will continue to gain market share year after year. If we are entering a multiyear oil price war as seems likely it is possible that the oil industry never recovers.
Whole article worth the read
https://www.forbes.com/sites/rrapier/2020/03/08/what-was-russia-thinking-in-refusing-to-cut-oil-production/#147e1f8a7fcc
Wellstone ruled
(34,661 posts)Sovereign Wealth fund recently Invested tens of Millions in Tesla. EV's are here to stay,and only increase in usage.
Meanwhile,MBS and Vlad will duke it out over who gets to sit next to the Orange Anus .
bronxiteforever
(9,287 posts)at140
(6,110 posts)lion's share of electricity they use to charge batteries comes from coal, oil, nat gas & nuclear.
Wellstone ruled
(34,661 posts)The Battery is still the issue as well as old battery disposal. Watch for Honda and their Hydrogen powered vehicles to be a major player as well.
BigmanPigman
(51,590 posts)Thank You!
Poor, poor Putin...
bronxiteforever
(9,287 posts)mitch96
(13,895 posts)They can't stop. It's their only commodity that they make money from . Rachel's book talks all about it. If they can't sell oil they will be broke.... poor babies..
m
https://www.npr.org/2019/10/05/767572890/rachel-maddow-on-new-book-blowout
ret5hd
(20,491 posts)Trump
Brexit
Media
Oil
Financial Systems
Disease
etc etc etc
Putin thinks he, and by extension Russia (but the primary concern being Putin himself) will come out on top.
A version of "Better to reign in Hell than serve in Heaven."
sandensea
(21,627 posts)As did Bone Sawltan.