Translated material
OPEC under guardianship
Leonid Velekhov
The United States managed to bring down world oil prices. Russia assures that this will not make it worse
The United States managed to bring down world oil prices. Russia assures that this will not make it worse
(Photo: AP )
After long discussions, the countries included in OPEC (an association of oil exporting countries that includes Algeria, Venezuela, Indonesia, Iraq, Iran, Qatar, Kuwait, Libya, Nigeria, the United Arab Emirates and Saudi Arabia) finally agreed on last Tuesday about increasing oil production.
They did this under pressure from consumer countries, primarily the United States, which has recently begun to experience considerable economic difficulties due to the rise in world oil prices, which has been going on for a year. Although pricing in the oil market, as experts say, is a sometimes inexplicable and unpredictable process, this time the reason for the unprecedented rise in prices was the decision of the OPEC countries to sharply limit oil production, made a year ago. Then, in March last year, this decision was caused by a drop in prices as sharp as the current rise: a barrel at the beginning of 1999 cost $10. After production was limited, prices began to rise rapidly and tripled in a year. At the beginning of this year, a barrel was already worth $30 and was not going to stop there. Fuel prices in the United States, the world's largest oil importer, have doubled in a year: one gallon of gasoline (3.79 liters) now costs one dollar 60 cents. Trying to balance the situation on the domestic market and prevent an energy crisis, the country has greatly squandered its accumulated oil reserves - they have now fallen to the level of the 80s. In February of this year, the United States launched a brutal attack on oil exporters, demanding that they increase production and thereby bring down prices. Exporters - including the Persian Gulf countries and Venezuela, which are absolutely loyal to Washington - resisted until US Energy Secretary Bill Richardson, during a February tour of oil countries, threatened that the United States would impose trade sanctions against them and, most importantly, deny them military protection. help.
The solution found last Tuesday in Vienna at the OPEC conference became a compromise for all participants in the discussion. Initially, the United States demanded an increase in production by 2.5 million barrels per day (this would bring the price down to $19-20 per barrel), Saudi Arabia proposed increasing quotas by 2 million, Kuwait - by 1.7 million, and the poor oil sheikhs led by Iran and Libya generally did not agree to a larger increase than 1.3 million (which would have left prices at the same level). As a result, they agreed on a figure of 1.452 million barrels, which corresponds to a 6% increase in Opeka oil production. Iran, the world's second-largest oil producer after Saudi Arabia, did not agree with this figure and did not formally join OPEC's decision. But only formally. Already on Wednesday, Tehran announced that it does not want to lose its share of global production and will increase production. Thus, by not signing the Vienna Document, Iran actually joined the new cartel agreement.
The decision made, according to experts, will bring prices down to $24-25 per barrel. They will remain at this level until the summer, and by winter they will “grow” to 27-28 dollars - this is the forecast.
Oil, as you know, is “our everything.” For Russia, an increase in oil production and, accordingly, a fall in prices, frankly speaking, is not the most joyful event. Russia is not a member of OPEC, but adheres to the policies of this organization, as do all other large exporters that are not members of it, for example, Mexico and Norway. It was the unprecedentedly high oil prices that persisted throughout the last year that provided us with a positive trade balance (in January-February of this year it reached $7.8 billion and more than doubled the same figures last year), an increase in foreign trade turnover by 20 percent and an increase in export volume by 36 percent. A programmed drop in oil prices will hit these remarkable numbers. Suffice it to say that a drop in the price per barrel by $1 will lead to a deterioration in the notorious surplus by $850 million (Russia exports 850 million barrels per year).
The head of the State Duma Banking Committee, Alexander Shokhin, believes that a fall in world prices below $25 per barrel is fraught with unpleasant consequences for the Russian economy. Foreign exchange earnings from oil exports are now replacing external financing, which is included in the budget and for which there is no hope in the foreseeable future. With oil prices falling to $20 per barrel, Shokhin does not rule out emissions and inflation.
However, while we are talking about a reduction to 24-25 dollars, Russian politicians claim that this does not threaten Russia with disaster. Yes, of course, additional income will decrease, “but that’s all.” The national budget is calculated based on an oil price of $18-19 per barrel, and the global market situation is unlikely to fall below this level. The de facto head of the Russian government, Mikhail Kasyanov, has already stated that “the government is ready for a possible drop in oil prices, the situation is under control, and the budget will be fulfilled in the second quarter.”
However, Russian optimism in the oil field has long been known. It is almost irrational in nature. For example, Russia has long been fighting for the lifting of international sanctions on Iraq and, above all, for the lifting of the oil embargo. Iraq, as we know, is potentially the largest oil producer after Saudi Arabia and is a member of OPEC, although today its membership and its quota (the second largest after Saudi Arabia) are frozen. When sanctions are finally lifted through the efforts of Russian diplomacy and Iraq spills its 100 million tons of oil onto the world market, prices will fall not to 25 or 20, but to 10 dollars per barrel. Some optimists believe that the losses will be more than repaid by contracts for the development of Iraqi fields, which will be received by Russian firms. But those contracts still need to be obtained...