The Oil Dominance Battle!!!!!

The World has been going through a lot lately due to the most unforeseen situation occurring due to the Pandemic. The world economy is crashing, countries are becoming bankrupt. The export-import cycle has been disrupted. IN these circumstances, a new issue has aroused which has in fact benefitted many Oil importing countries but is greatly affecting oil-exporting countries.

SouhtFront

  • Background:

  • The Organization of the Petroleum Exporting Countries is an intergovernmental organization of 13 nations, founded on 14 September 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), and headquartered since 1965 in Vienna Austria. This Organization was established by countries that controlled more than 50% of the world oil and more than 85% proven oil reserves. Thus was the beginning of a cartel that had a great influence on the world oil market and indirectly on the world economy.

    OPEC was an organization established to control oil prices by forcing its members to limit oil production. Less production would mean higher oil prices. 

     

    OPEC+ members:

    In addition to the OPEC members, the following 10 more oil-exporting countries, led by Russia mainly, are grouped as OPEC+ cartel from the year2016 as they cooperate in fixing the global crude oil prices by agreeing to production quotas so that global production is below the global demand/consumption. OPEC+ countries encourage unnecessary excess capital investment in the global oil sector instead of encouraging their cheaper oil production at lower capital investment.

     

  • Russia -Saudi Arabia Feud:

  • Though Russia accepted OPEC demands of the OIl production Quota.  It also decreased its oil production at certain times as in 2017.  This time as the de facto leader Saudi Arabia asked the OPEC+ members to cut their production but Russia was against the cut due to the growing Pandemic and increased US dominance in the Oil industry. So in order to counter the American oil industry, Russia refused to cut its input. Saudi Arabia in return retaliated by increasing its production and giving a discount.

    It is said that Saudi Arabia has the ability to produce oil at a rate of 3 $ per barrel whereas Russia produces it at a rate of 30$ per barrel. So Saudi Arabia has a price advantage but  Russia believes that it can maintain its market share.



     As a result of this standoff, the prices of crude oil have reached the lowest in 30 years. Even the US oil reached negative in terms of the dollar.



     The share of major countries is as follows:

  • Effects on Russia:

  • The shocking results show that Russia has increased its market share as compared to Saudi Arabia. China has imported more from Russia than from Saudi Arabia. Similarly, the European  Union import more from Russia than from Saudi Arabia. So, in fact, Russia has not been affected by cheap Saudi Oil.

  • Sources:

    1. https://www.cnbc.com/2020/04/01/5-charts-that-explain-the-saudi-arabia-russia-oil-price-war-so-far.html
    2. https://uk.reuters.com/article/uk-global-oil-russia/opec-should-focus-on-market-share-as-oil-demand-recovers-moscow-idUKKCN22B0VI
    3. https://oilprice.com/Energy/Energy-General/Saudi-Arabia-Vs-Russia-The-Next-Oil-Price-War.html
    4. https://www.ft.com/content/1da60fa2-3d63-439e-abd4-1391a2047972
    5. https://www.aljazeera.com/indepth/opinion/worse-oil-market-wti-collapse-200424162623936.html
    6. https://oilprice.com/Energy/Crude-Oil/Russia-Steals-Chinese-Oil-Market-Share-From-Saudi-Arabia.html

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