Bloomberg: Putin Dumps MBS to Start a War on America’s Shale Oil Industry
At 10:16 a.m. on a wet and dreary Friday morning, Russia’s energy minister walked into OPEC’s headquarters in central Vienna knowing his boss was ready to turn the global oil market upside down.Alexander Novak told his Saudi Arabian counterpart Prince Abdulaziz bin Salman that Russia was unwilling to cut oil production further. The Kremlin had decided that propping up prices as the coronavirus ravaged energy demand would be a gift to the U.S. shale industry. The frackers had added millions of barrels of oil to the global market while Russian companies kept wells idle. Now it was time to squeeze the Americans.After five hours of polite but fruitless negotiation, in which Russia clearly laid out its strategy, the talks broke down. Oil prices fell more than 10%. It wasn’t just traders who were caught out: Ministers were so shocked, they didn’t know what to say, according to a person in the room. The gathering suddenly had the atmosphere of a wake, said another.
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Update #1: Putin Launches "War On US Shale" After Dumping MbS & Breaking Up OPEC+ (Zero Hedge)
Update #2: Oil Apocalypse . . . . Putin said, "Nyet" to Mohammed bin Salman (OilPrice.com)
WNU Editor: Millions of U.S. jobs are tied in with the energy industry. This chaos in the energy industry is going to cost a lot of jobs, and all of this will be happening right before the U.S. Presidential election. The question that remains unanswered is .... what will resonate more with the American public? Cheap gas prices, or an increase in unemployment. Historically speaking, cheap gas prices have always favoured the President in power. But these job loses are going to be happening in states like Pennsylvania that are critical to President Trump's re-election campaign. Either way we are going to be finding out in the coming months.
2 comments:
F$ck Putler!
This is indeed a very tough situation. I have many friends and clients who are on the oil and gas industry and if we do indeed have cheap gas again this will no doubt cost allot of jobs. Many very good people will be adversely impacted. In fact, the energy industry in the Houston area hasn't fully recovered from the last time we had cheap gas.
All things being equal cheap oil/gas favors economic growth. As the consumers/users are able to obtain oil and oil related products at a less expensive price, it has a ripple effect across the economy as a whole leading to more robust economic growth. As jobs are lost in the energy sector, it is more than offset by job growth in other areas.
At first glance, it's hard to see what Russia hopes to accomplish here. Many astute analysis have called the Russian economy "a one trick pony" dependent almost entirely on the energy sector. In contrast, the US is not in such a situation. Given the dependence on the energy sector that countries like Saudi Arabia exibit, I don't envision them being able to maintain a position where oil and gas are cheap.
Surely they know this. I think they do. The likely plan is to try and hurt the US energy sector costing high paying jobs right before the elections all before the positive ripple effects of cheap energy revervate throughout the economy with the ultimate goal of getting Trump replaced as POTUS. I think the Russians want someone more compliant with them in office and, if they can get the right person in from their perspective, this person mm ay even wage war on the frackers for them!!
For what it's worth, I think the plan is going to fail and it's going fail spectacularly. What I think the Russians and perhaps others fail to realize is tte benefits from cheaper oil and gas are going to materialize much faster than the downsides of job losses in the energy sector and those upsides will far outweigh the downsides. Essentially this will strengthen the POTUS they fear, hate, and want out of office anyway possible. While this is happening they will hurt their energy sectors they are heavily dependent on. I predict at the end of this the US position as the world's top energy producer will be even stronger than it was before with the positions of countries like Russia and Saudi Arabia weaker.
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