The US President Donald trump on 20 September appealed to the members of the Organization of countries-exporters of oil (OPEC) to immediately reduce the price of “black gold” and to stop using his position “monopoly”.
“We are defending the Middle East, they will not long be safe without us, and yet, they continue to raise oil prices. Monopoly OPEC needs to reduce prices!” — trump wrote in his “Twitter”. After this, the price of Brent crude oil has stopped growing and even declined by 0.4%.
This loud statement was made before the meeting of the Ministerial monitoring Committee of OPEC, which will take place on September 23 in Algiers. The Ministers plan to discuss the overall situation on the oil market and the countries ‘ compliance with their commitments to reduce the extraction of resources until the end of 2018, as well as a model for further cooperation with 2019.
Note that this is not the first such Declaration from the mouth of Donald trump. In June of this year, by the way, is also ahead of the summit of OPEC+ in Vienna, the us President said that oil prices are too high, and the cartel “relapsed” and is “not good.” A similar statement he made in April, when the “black gold” was priced at 73 dollars per barrel. But then if trump was just saying, precisely, “Twitter”, now his words are confirmed by concrete steps.
The fact that the U.S. Congress gave the bill “Against the cartels in the production and export of oil,” about which already wrote “SP”. The document proposes to extend to OPEC antitrust the Sherman Act. It is a known law that over a century ago was applied to the “oil Empire” of John Rockefeller’s Standard Oil. As a result, it was divided into seven companies.
The adoption of this law will allow American authorities to serve in the American courts in suits against OPEC, accusing them of manipulating oil prices. Foreign governments will not be able to exercise their sovereign immunity. As a result of the sanctions can be imposed against the countries themselves, and against companies cooperating with the cartel. And in the second stage, and against businesses that do business with these companies.
The document was first proposed in 2000, but since then it has not been able to adopt. In 2007, the bill even went through both houses of Parliament, but the President has not signed it. But the known drastic steps trump might go for it.
In August, OPEC+ has executed an agreement to reduce oil production by 108%. But at the last meeting it was decided to increase production. Now it became known that at the upcoming meeting of Iran will not support OPEC’s decision regarding the redistribution of quotas within the Alliance. In addition, the Minister of energy of Russia Alexander Novak said that the meeting in Algiers, the participants can discuss the possibility of increasing oil production more than a million barrels per day.
Now the market froze in anticipation of the OPEC decision+. The morning of Friday, November futures for Brent oil rose slightly — up to $ 78,75. per barrel, WTI, on the contrary, has decreased on 0,14% – to $ 70,22. per barrel.
It would seem that trump wants to bring down the price of oil and kill two or more birds with one stone. America will buy cheap resources, but the Russian economy back into crisis. But, as told to “SP” experts, things are not so simple. In fact, high oil prices are beneficial to United States, and the loud trump statements may only be directed at domestic consumers.
Director General of national energy security Fund Konstantin Simonov is convinced that the threats trump is nothing more than demagoguery.
— Mechanisms of influence on OPEC, trump is not. Washington’s plans to condemn the international organization for the laws of the United States look ridiculous. In fact, the congressmen propose to apply its own antitrust laws a century ago, against the organization, where the United States itself is not included. It’s such a demonstration of power, which in reality no one is terrible.
If to speak about the real impact on oil prices, the US has a huge number of tools for this. First of all, the dollar and the manipulation of inflow and outflow of money in the futures market, which establishes prices. Managing cash flow, America could easily affect oil prices. In fact, that the US is a key market maker and player in this market given its structure.
Finally, don’t forget about the Iranian sanctions, which lead to the reduction of supply of oil on the market and higher prices. For the combination of these factors, I can say that Donald trump is one of the main reasons for the increase in oil prices.
Not so long ago there was a report of the World energy Agency, a bit of panic for buyers and optimistic for us. It says that the price of oil will exceed $ 80 because of Iranian sanctions, as the loss of these volumes no one can compensate. It turns out that the tramp and increases the price of oil.
“SP”: — Why, then, he writes that OPEC needs to reduce prices?
— Because he has on a nose elections to Congress. He can not directly say that high oil prices benefit the United States as a simple voter is not very happy that the price of a gallon of gasoline increases. So he engaged in “Twitter demagoguery.”
“SP”: — That is the trump consciously working to increase, not decrease oil prices?
— Of course. USA by the best expensive oil. Today, they are subject to condensation are the major producers of oil. They are involved in projects around the world. Of course, the United States and the largest consumer. But if you count all the pros and cons of high prices win. Through them, America is now experiencing a new round of the shale revolution and the production of “black gold”. Than oil costs, the more energy will be produced in America.
Deputy Director of the national energy Institute Alexander Frolov in detail told to “SP” on why America benefit from more expensive oil.
— According to recent reports, the US is now producing about 11 million barrels per day. This has made them one of the first oil producing countries in the world in terms of production, along with the us and Saudi Arabia. It would seem that they can support themselves and are therefore able to reduce the price of oil. But all is not so simple. Before the crisis on the hydrocarbons market 2014-2016 in the United States began to rise sharply oil production due to shale deposits. At the peak, which peaked in 2015, they produced 9.6 million barrels per day, of which almost half were oil shale.
But during the crisis they have experienced significant production cuts. Shale production has fallen by 25%. This suggests that oil production in the US is never cheap. The average cost is about $ 36 per barrel, including capital and operating costs. It is more than two times more expensive than mining in Russia. And that’s just the average American price, in fact on many complex projects, the cost reaches $ 50 and above. American oil producers are not interested in low prices because when prices are below $ 40-50 per barrel it is simply not profitable to produce oil.
The current production growth in the United States began only after the transaction of OPEC, which led to stabilization and rising prices. It turns out that oil production in the US remains dependent on high oil prices, and, therefore, the actions of OPEC and other major oil producers, including Russia. The more that production is now growing at the expense of the most expensive shale oil. It accounts for about 70% of the total.
Reduction of prices on hydrocarbons will lead to the fact that the production will again begin to decline. And much faster than last time. Taught by bitter experience, people will run out of the industry, sparkling heels. This will lead to new large-scale crisis from which not all companies will be able to get out. During the last crisis went bankrupt 150 companies, and it’s a lot even by American standards. A new decline is even negativna impact on the economy of the country.
“SP”: — Why is trump talking about lowering oil prices?
— It’s a political statement, designed for the American electorate. In their understanding, the low price of oil is lowering fuel prices at the pump. Nice simple American who loves to drive fast, reducing the price of gasoline? Of course, it’s nice. And now their President is seeking to reduce oil prices, and the nasty Arabs and the Russians don’t want to.
Of course, we cannot ignore the individual senators who are chosen are, frankly, not intellectual ability. They can bring a variety of bills. Another question is whether voted on this project and will he find the force of law. Personally, I think not. Specialized agencies and committees have to give their assessment, explaining that the industry is just starting to come together, the money went, the banks that have acreditable the oil companies at the very top, and sighed with relief.
There is a belief that American banks can easily write off these losses, and the US just print more money. But in 2007-2008, a number of banks had 7-10 billion dollars of bad debts to burst. And in the case of American oil industry debts there is much more. If oil prices fall sharply, the oil industry of the United States, and the economy will have hard times.
With all this, the US still remains the largest net importer of oil. They get huge amounts, but also consume huge amounts — about 19 million barrels of oil per day. Yes, of course they hate to pay more for this oil. But it is a question about whether it is better to be rich and healthy than poor and sick.
Before US is a simple choice — high hydrocarbon prices, and then they are rich and healthy, or low — and then they are sick.
“SP”: — So the widespread opinion that the US authorities want to bring down the price of oil to finish off the Russian economy is not true?
I can’t say that this is nonsense. During the crisis the purchasing power of the Russian population really declined, like many other economic indicators. But the oil industry has experienced difficult years. Moreover, our oil and gas companies remained among the leaders by profit. This means that for the rest of the world companies of this industry what was happening was not very comfortable. Our production facilities due to low cost, reduce competition, the devaluation of the ruble relative survived the low oil prices.
Well, it was worth $ 33 per barrel. And as our economy is torn to shreds? No. And in the US at this price level 150 companies went bankrupt. It is a blow for the financial sector, and insurance companies, not to mention most of the oil and gas industry. Our oil and gas low price will survive, but American or Australian are not. And if hydrocarbons are very cheap for a long period, it will adversely affect the United States.
In fact, the whole world economy breathed freely after the prices went up. And trump can say whatever you want, but I think its business partners will not understand if he really seriously undertake to reduce oil prices.
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