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by crisdux
2278 days ago
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It's way more complex than that. This is completely between the Saudi's and Russians. US shale is just a unintended consequence (tho temporarily good for them.) Damage to US shale is unintended and the Saudi's know it will be very temporary. The US companies have a near endless supply of capital, especially now with the federal government being on a spending spree. The shale fields can be easily turned off and on. Loans can be restructured and renegotiated. The last time the Saudi's tried to aim their efforts at the US it ACTUALLY caused the US shale oil companies to consolidate, innovate and they brought their production costs down significantly! The US oil industry is extremely resilient. The goal for the Saudi's is to bring the Russians to the negotiating table and get them to agree to a meaningful cut in oil production, nothing less than 1 million bpd. They've basically said this. Their strategy is completely aimed at the Russians. The Saudi's are filling EVERY port and transfer station in the world with their cheap crude. The Russians transport all their oil in pipelines. If demand drops for Russian oil, they will be forced to turn off their wells because their pipelines can't handle extra oil, and the Russians have no where to store the extra. The Russians don't want to turn off their oil wells because its dangerous, it usually takes them offline for a long time, and they're expensive to get started again. |
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the current oil skirmish is a part of much bigger war - Russia went into Syria and has supported the Shia belt (Hezbollah - Asad - Iraqi Shia government - Iran) against Sunni (ISIS/Saudis) despite having no religious preference between Shia/Sunni in particular to block Saudis from being able to pipeline the stuff to Europe (which is an oil and especially natural gas market critical to Putin's Russia survival, and where Saudis have been trying for example to send oil and LNG tankers to. The LNG is more expensive than pipelined NG while Saudis have a lot of NG, so they need a pipeline to Europe and that would be existential blow to the current Russia economy and its "soft" power (like the threat of turning gas off in winter) power over Europe). In this context i don't see Russia going to negotiate wrt. current skirmish. If anything i think it would go all the way in Stalingrad style, Russian population economical suffering be damned, in hopes of forcing Saudis to come to bigger negotiations in much weaker shape.