11th of March 2020
Translated by a contributor for Tjen Folket Media
Oil prices have plummeted after the weekend. The background for this is the game played between the imperialist superpowers. Russia is against OPEC, primarily Saudi Arabia, but Russia’s real goal is to harm the US.
American companies have in the last couple of years extracted shale oil in full swing. In Norway, terms like oil sands and fracking are known from the debate stage, especially since extracting oil from oil sands and shale is way more polluting than the most common methods. Extracting shale oil was common in the 1800s, but dwindled more or less after cheaper methods became widespread in the 1900s.
Environmentally Dangerous Fracking for Yankee-imperialism
Since 2014 American companies have intensified extracting shale oil thanks to subsidies, new technology and very high oil prices. Thus the US became more self-reliant on oil than it has been in a long time. This has made it possible for the US to put multiple economic sanctions on its oil-producing opponents like Iran and Russia. This has been a conscious move from US-imperialists.
The US’s new self-sufficiency within the oil is considered by experts as the reason why Russia has taken such a hard line in negotiations with the oil cartel OPEC. OPEC is made up of twelve oil-exporting countries that have agreed to regulate oil prices by regulating how much oil each member pumps into the market. The Main actor within this alliance is Saudi Arabia which produces three times as much oil as the second-largest member does (Iran).
Russia’s fatal play for the shale oil producers
Over time Russia has cooperated with OPEC, but this cooperation has collapsed during the weekend. Saudi Arabia has started to heavily step up the production and the prices on the world market have plummeted because of this.
The consequences can be fatal for the American shale oil producers. They have already debt up to their nose and their production is far from profitable with how low the oil prices are now. This is a major strategic and political problem for the US, which is risking the collapse of an important domestic industry and a weaker position in the geopolitical arena.
Dagens Næringsliv wrote yesterday (10th of March):
“Nobody bleeds more than American shale oil producers in the aftermath of the price war in the oil market. The stock prices in American shale oil companies like Occidental and Oasis Petroleum have fallen up to 70 percent since the end of the last weak.”
Fearing the Consequences for Yankee-imperialism
A CNN commentator writes that one fears a repeat of the 2014-2016 oil crash, where dozens of American oil- and gas companies went bankrupt and hundreds of thousands lost their jobs.
This game can be a wise tactic for Russia. Both China and the US are having major problems with coronavirus and the plummeting stock market. Saudi Arabia is more dependent on its oil revenue than Russia is. Saudi Arabia covers 65% of its budget with petroleum revenue, while Russia only covers 37% of its budget with petroleum revenue.
Saudi Arabia probably needs an oil price of 80 dollars per barrel to have a stable budget, while Russia only needs half of that. Even though Saudi Arabia is behind the fall in oil prices, it will affect the Saudi regime the worst. Saudi Arabia has throughout the years been a semi-colony of the US and the fate of the regime is closely tied to US-imperialism. In a way, they have run the errands of the US in OPEC when they made sure to keep the oil prices high enough so that the US can be self-reliant.
Oil-producing countries affected by war like Iraq, Iran, Libya and Venezuela will be hit hard by low oil prices States a CNN commentator Who also fears that there are major consequences in the time to come.
Why oil prices are crashing and what it means (CNN Business)
Skiferolje og skifergass stemples som miljøsvin (Finansavisen)
Lave oljepriser er ikke nok til å redde børsene (Aftenposten)
Spillet om oljeprisen: Derfor faller den som en stein (Sysla Offshore)