Organization of the Petroleum Exporting Countries (OPEC) and its allies at a summit in Vienna last week failed to secure a deal on oil production cuts, after Moscow refused to tighten supply. “It’s the biggest thing that ever happened to America.”. Which leads to the second and more convincing theory: that Russia decided to make a play for more power in the global oil market. That’s spooked markets around the world, with shares in Tokyo dropping 5 percent and a top index on Wall Street falling by 7 percent, forcing a trading stop shortly after open on Monday. It’s why experts are split on the real reason for why this happened. Between America’s growing exports and Saudi Arabia’s overproduction, there was a glut of oil for sale and the price continued to plummet. An oil price war is here to stay, analysts warn — even as prices tumble to nearly two-decade lows. The seductive absurdity of Netflix’s Emily in Paris. However, its impact on Iran may be not as huge as some expected. This article was first published in the latest issue of The Week magazine. It couldn’t do that by agreeing once in a while to cut production with the Saudis. That gave both Saudi Arabia and Russia a choice: continue in their pact, or try to fend for themselves in a more competitive marketplace. The immediate results seem promising, if that is the Kremlin’s true intention. Now Moscow needs a new way forward — and it doesn’t involve cooperating with the Saudis, it involves competing against both them and the US. Good for the consumer, gasoline prices coming down! He believes that global development requires competition and not cartels, but the oil price war is not good for oil production in the U.S., Iran and Venezuela. During the past few days, the world has witnessed an ongoing oil price war between Saudi Arabia and Russia, while the global coronavirus outbreak is dragging down the oil markets. The first post-VP debate poll says Kamala Harris won. So, is the oil price war bad or good for the world economy? The Saudis through OPEC responded later that year — not by cutting production to keep prices higher, but rather by flooding the market with oil. Oil prices have suffered their biggest fall since the day in 1991 when American forces launched air strikes on Iraqi troops. The gush of Saudi oil "if sustained, would savage national budgets from Venezuela to Iran, threaten the heartland of America's shale revolution, and upend politics around the world." Ashford, CATO’s petrostates expert, told me that by themselves those countries couldn’t swing global oil prices. Millions rely on Vox’s explainers to understand an increasingly chaotic world. If the Saudis tank it, as they just have, it goes down pretty much everywhere. It gave Washington way more power over the energy market and future revenues for Riyadh and Moscow. The 30-minute program covers a wide range of domestic and international topics, providing a balanced and critical perspective on current affairs and analysis within the framework of cross-cultural and multi-disciplinary comparisons. It’s still unclear exactly why that’s the case. There will be more consolidation — fewer companies in the shale oil industry, perhaps — but America’s production won’t go away. That’s because three years ago Russia made a deal to coordinate its production levels with the group, in a pact known as OPEC+. The Saudis knew there'd be serious economic consequences, but they were not going to let Vladimir Putin bully them, said Anjli Raval and David Sheppard at the Financial Times. That brought the price per barrel down by about $11 to $35 a barrel — the biggest one-day drop since 1991. "Dialogue with Yang Rui" is a prime time English-language daily talk show on CGTN. Here's why it's happened and what it means. Oil is on track for its worst day since 1991 and second worst day on record ... dropped more than 30% at the low to levels not seen since Feb. 2016 #OOTT Here's what's going on: https://t.co/dcQYzkPeLJcc @naterattner pic.twitter.com/ZPCm5KXLeF. Kamala Harris and Mike Pence faced off in 2020’s only VP debate. When is the next presidential debate? Get our newsletter in your inbox twice a week. And unlike in 2015-2016 during which China bought up a lot of oil during a period of low prices, there aren’t really any buyers like that to pick up the slack right now, as demand is dropping worldwide, Ellen Wald, an oil market expert at the Atlantic Council think tank in Washington, told me. Stocks for smaller to mid-size US shale companies are in free fall now, with the valuation for some dropping as much as 45 percent in recent days. Sam Meredith @smeredith19. This economic conflict resulted in a sheer drop of oil price over the spring of 2020. The problem is that Russia’s play and the Saudi response may end up hurting them both. Saudi Arabia kicked off an oil price war with Russia at a time when the world is dealing with the coronavirus outbreak decimating supply chains, ... India-China border row explained … Last week, members of the Organization of the Petroleum Exporting Countries (OPEC), a cartel of 15 countries of oil-producing nations, met at OPEC’s headquarters in Vienna to discuss what to do as the disease’s impact has lowered global demand for oil. American businesses have borrowed heavily at low rates. However, Professor Liu Ke, dean of the School of Innovation and Entrepreneurship under Southern University of Science and Technology, argued that the oil price crisis will not last long, given the fact that Saudi Arabia, Russia, OPEC and even the U.S. are all losers under the current situation. Together, they could. Expect shrinking and consolidation of the U.S. shale industry. What is clear, though, is that lower demand for oil and longer-term trends in the energy market have ruptured the tepid Saudi-Russia alliance for now — and the consequences will be felt everywhere, including in the United States. The profit margin will be thinner, but they’ll still gain customers and some revenue. Our Middle Eastern "ally" has decided to "undermine an important part of the U.S. economy at a critical time," said Daniel Larison at The American​ Conservative​. “At this point, it’s every country for themselves,” Emily Meierding, a Naval Postgraduate School expert on international oil cooperation, told me. “Mr. The Russians, wary of such a move for weeks, opted against the plan. The Saudi-Russian oil price war explained. The first is that Russia wants prices lowered — not propped up via its Saudi deal — to hurt the American shale industry. Still, the Riyadh-Moscow alliance continued, as there were no major disruptions to the energy market — that is, until coronavirus led demand for oil in Asia to tank. ", The U.S. economy could be a big loser in this, said David ­Fickling at Bloomberg. Saudi Arabia and Russia survived their change in fortunes by selling cheaper oil to China, which desperately needed priced-down crude during its economic slowdown of 2015 and 2016. March 14, 2020. Few can predict what will happen next, especially since it’s unclear what further effects the coronavirus may have on the global economy. But there’s a big downside: The price for oil is a global one. Saudi Arabia is hoping that lowering prices, which also hurts its own bottom line, will get Moscow to realize that and start cooperating again. Moscow started this — and "has effectively sent its tanks on to the White House lawn." The smartest insight and analysis, from all perspectives, rounded up from around the web: An oil-price war between Russia and Saudi Arabia sent more shock waves through "a world economy already reeling from the coronavirus," said Verity Ratcliffe at Bloomberg. As major industries grapple with the spread of COVID-19, an oil-price war "could cause widespread bankruptcies in the American energy industry" and crush capital investment, since "spending on energy is a major driver of demand for heavy industrial equipment." According to data from NBC News, Pence interrupted her nearly twice as many times as she interrupted him. It’s scheduled for October 15. In 2014, the US boomed onto the scene with its revolution in shale energy, capturing a greater and greater slice of the global oil market. They told me if smaller US companies go bust during this time, bigger American firms like ExxonMobil will just buy their assets. Key Points. Between 2017 and now, Meierding told me, Saudi-led OPEC cut its oil output by 4 to 5 million barrels per day. In 2016, Saudi Arabia and Russia agreed to cooperate in the world oil market by coordinating their production. Russia’s play, then, would be doomed to fail. But two schools of thought — which aren’t mutually exclusive — have emerged. The turmoil, on top of the coronavirus crisis, shook financial markets, with U.S. stocks plunging by 7 percent early in the week. It’s going to lose revenue in its bid to compete with America while not necessarily gaining strength in the energy marketplace. Here’s who came out ahead. Instead of paying Saudi Arabia and Russia for their oil, America was now a serious competitor. 59 percent of debate watchers said Harris won, and 38 percent said Pence won. If you want to read more like it, try the magazine for a month here. Sign up for the Riyadh’s plan backfired. American investors "have been falling out of love with crude production for a while," and they'll be reluctant to put in the capital necessary to withstand "trench warfare with Russia and Saudi Arabia." Despite being asked by the Saudis, Russia didn’t really cut its production — leaving Saudi Arabia to shoulder the burden. Please also read our Privacy Notice and Terms of Use, which became effective December 20, 2019. Dwindling revenues mean global energy companies — including smaller shale-producing firms in Texas and the Dakotas — make less profit. newsletter. "Moscow has taken aim at President Trump's much-vaunted U.S. energy independence" with what amounts to an "economic smash-and-grab. Their debt gives them little room to "withstand the occasional hiccup in demand or a problem with supplies." That in turn makes lenders vulnerable and raises the chance they will pull back just as businesses need money. Doing so would keep oil prices higher, which would bring in more revenue for nations in the bloc whose economies are heavily dependent on crude exports. How Obamacare became Democrats’ most powerful political weapon, About that fly in the vice presidential debate. ), Copyright © 2020 CGTN. "This is great for the world economy. Beijing ICP prepared NO.16065310-3. Meanwhile, he doubted that the price of oil would go away soon given the disagreements between Russia and Saudi Arabia on their foreign policies on the Middle East. ", "There are rare moments when the world economy seems to be reconfiguring itself beneath our feet," said Neil Irwin at The New York Times. "The price war is going to affect Iran less because of the past difficulties Iran has had," he said. Emphasize your popular positions and your opponents’ unpopular ones. At last week’s meeting, Saudi Arabia, the cartel’s leader, suggested the participants collectively cut their oil production by about 1 million barrels per day, with Russia making the most dramatic cut of around 500,000 barrels a day. The Russia–Saudi Arabia oil price war of 2020 is an economic war triggered in March 2020 by Saudi Arabia in response to Russia's refusal to reduce oil production in order to keep prices for oil at moderate level.