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Oil Price Drop

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Russia and Saudi Arabia’s oil price fight shows the world doesn’t have what it takes to fight coronavirus

To fight the economic fallout from the spread of coronavirus countries will need to engage in massive global coordination. On Friday, and again on Monday, we had our first test of that global coordination as oil producers met to discuss how to stabilise the price of the commodity.

And unfortunately, ladies and gentlemen, they failed.

It all started on Friday when Russia decided that it would not cut oil production in order to keep prices stable. As it stands, demand for oil is expect to slip due to coronavirus disruptions, so the OPEC producers and Russia would in theory want to limit supply and keep the price of oil from collapsing.

But reports indicate that Russia decided not to cut production for a reason completely unrelated to coronavirus – to take revenge against the United States for sanctions related to Russian meddling in US elections.

That is to say, that in the midst of all of this coronavirus chaos, Russian President Vladimir Putin decided it would be a good time to turn his back on OPEC to start a price war just to hurt shale producers in the United States. At best this was petty, at worst this is dangerous.

On Monday things started leaning toward dangerous, as Saudia Arabia retaliated against Russia, cutting prices and announcing that it would boost output and offer discounts to the US, Asia and Europe.

This says a lot about how the world will fare combating coronavirus. If two parties with interests as aligned as Russia and Saudi Arabia – whose economies depend on oil prices – cannot coordinate in this time of crisis, then who can?

What the world needs now is love, sweet love.

Ideally, now is the time for every country in the world to put their differences aside and row in the same direction. Markets move on trust. Last week the market could trust that Russia would act in its own self interest to keep oil prices high. That trust, in turn, kept markets more stable.

Now that trust is gone, and so the market is puking. Goldman Sachs sees Brent crude, the European benchmark price, hitting $US20 a barrel. Analyst Damien Courvalin that this oil price war will likely be worse than the last one in 2014 “as it comes to a head with the significant collapse in oil demand due to the coronavirus.”

This will mean lost jobs and a deep recession in parts of the US. Energy producers hold a lot of debt and so weak cashflow could mean defaults across the industry.

After a couple years of flatlining consumption the energy sector has been in a bad place. States, like Texas, that have economices that depend on oil production were already tightening their belts. At least, though, back in December it seemed like oil producers were working together to do something about it. They cut production. Markets could trust that countries were cooperating for their own benefits and the benefit of the global economy.

All that has changed. The goodwill is gone. Russia’s refusal to cut shows that it’s going to use this coronavirus crisis as an opportunity to inflict damage on enemies, not take it as an opportunity to show that it can be a good actor and cooperate on a global scale.

Putin isn’t here to make friends. That probably shouldn’t surprise anyone.

An ‘every man for himself’ attitude

What’s more disheartening is that it seems this “every man for himself” attitude is popping up everywhere around the world in the wake of the coronavirus.

The Chinese – whose refusal to let global public health officials on the ground at the beginning of the coronavirus crisis has undoubtedly made things worse – have decided to react to its spread with denial instead of cooperation. Internet conspiracy theorists are rewriting the history of the virus’ origin, blaming the US to absolve the Chinese government for its lack of action. On China’s heavily censored internet, it’s hard to see how that’s happening without the government’s blessing.

In Germany economists and businesses say the government is acting too slowly to use its surplus to combat the economic impact of the spread of the virus. That’s not just bad for Germany, but for all of the EU as Germany is in the best economic position to lead efforts to stabilise the region.

It is in everyone on the planet’s interest to keep markets stable and economies moving during this coronavirus crisis. Right now it doesn’t seem like countries have the will, or that there are any leaders with the ability, to keep us all on the same page.

If this keeping up things are not going to go well.

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5 COMMENTS

  1. I understand that Putin is 170 cm tall and the Saudi Prince is 183 cm tall, but that photo looks weird!

    10

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  2. Currently $2.01 per litre of 91 at Caltex High Street, Lower Hutt. Further down the road Z are sill gouging every cent at $2.06

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    • Reminds me about the knee trembler joke. When his knees start to tremble the lady kicks the box away.

      I will get my hat……

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  3. Freedom of speech n all
    That clown can write what he likes even if it is complete bollocks.

    I will admit I am a Russian sympathiser.
    Also, well justified as I know a hell of a lot more than is reported in the lying media.
    Iraqis are not my enemy.
    Iranians are not my enemy.
    Libyans are not my enemy.
    Russian people are not my enemy.
    The media is my enemy.
    Suckers need to stop making emotive responses based on their propaganda and lies.

    Russia.
    Let us forget the hate that the lying filth media spew and are usually too alcoholic to do any research on.
    Russia were our allies in 100% of World wars.
    Germany was NZ’s enemy in 100% of World wars.
    Russians don’t come here to NZ and shit all over our beaches, roadsides and parks. Germans do.
    Russians don’t come here to shoplift and tip off each other via websites as to the best stores to steal from. Germans do.
    Russians don’t walk around shops in the South Island having not bathed for days and dragging their smelly dreadlocks and unbathed bodies into shops. Germans do.
    Russia was an established country well before 1870. Germany was a collection of prima donna savage princes (Similar to Middle East today) prior to that.
    Communism was planned in Germany and taken to Russia at the point of a gun.

    Russia and Oil. When the Todd family of NZ wanted to buy oil to sell at a profit in their service stations (Europa) in the 1930s the ‘Seven sisters of Oil’ (USA/Dutch/UK) would only sell retail, so no deal. They did not want others to profit from enterprise. Capitalism and all that. A bit ironic.
    Todd’s sourced their oil from Russia. All went well for decades until BP decided to supply in the 1960s and then in the driver’s seat..well history, screw the little guy and take over…
    Good olde British Petroleum, what ho old chap.

    When UK wanted to go play Euro buddies in the 1970s with the tired and emotional French they had to bail out twice against the aggressive savage Teutonics they told NZ we don’t want to trade with you but hey we will still have your Head of State.
    Russia said ‘we will trade with you New Zealand; forget the politics’

    There is constant media bullshit about Russia and suckers just absorb it while half baked knowing that media lie like the filthy puppets they are.
    The Skripal thing 2 years ago in Salisbury where the massively incompetent tart that was titled the Prime Minister of Great Britain – and was no better than the tart called the Prime Minister of New Zealand – tried to start a war with Russia over a complete pack of lies. All gone away and the Skripal pawns have been ‘disappeared’ by the good ol’ British Govt. What ho old chap.

    Again, soft in the head folk were lazy and went to the MSM for ‘facts’. Misdirect.
    Hey peoples, they were trying to foment war. Who gets killed and maimed in war? The foot soldiers.
    Why is it that people can accept that the German savages used propaganda in the 1940s but were amateurs compared to the media lies (aka propaganda) of today. CNN, NYT, BBC etc.

    This unknown clown writing this unsourced piece of media garbage sounds like a yank.
    This is the country that went to South Vietnam to ‘save the people’ by dropping 20 Million tons of Agent Orange on the very same people; who napalmed these South Vietnamese people in their own homes but said Saddam Hussein was bad to use chemical warfare.
    You got that from the MSM right.
    This is the country that invaded Iraq (twice) , allowed Saudi Arabia to perpetuate massive human rights violations (Yemen just one of them) , went into Afghanistan to protect the poppy fields from the Taliban who were ripping them out (do ya really think they were ready to go into Afghanistan weeks after Sep 11 when it took over six month to get ready for Gulf War one and Desert Fking Storm ; wake up; it was an excuse to protect the poppy fields and they were preparing from the start of 2001; PNAC; the reason they have been there all this time; to protect the poppy fields; not build schools and hospitals)

    The USA went and destroyed Iraq to control the oil from there. It also sets an example to Saudi Rabies and Qatar what could happen if they don’t behave.

    Russia is not even in OPEC.
    Opec is their opponent.
    The Godfather: ‘It is not personal, it’s just business’
    Well this is just business.
    The author might want to stop having a sook and mistakenly taking mums birth control pills thinking they are MDMA because it is making this clown all sooky and emotional on his fact-free diet.

    To the fool who wrote this trash:
    -What is not fair is destroying Libya as Clinton/Obama did.
    -What is not fair is sending the troops into Afghanistan to control the poppy fields while pretending it is humanitarian. Fuck me. And the big bogey man UBL was a multi millionaire Saudi Arabian property guy who was not in Afghanistan by 2002. But, They are still there. Protecting the poppies.
    -What is not fair is invading and destroying Iraq and causing so much misery in order to control the oil output and prices
    -What is not fair is backing insurgents in the civil war in Syria – a sovereign nation- but hey the Yanks have done that in most Central and South American countries in the last 50 years (plus Philippines, Indonesia etc) what is one more country?

    Ed, could you send me the address of the clown writer here so that I can sent the fool a box of tissues to have a good sook into.
    I won’t bother with any education. The pantywaist is too far gone for redemption.
    The fool is still on about Russian interference in 2016. Pure propaganda as has been shown.
    I don’t need the name. I will address it to ‘Fool at…’

    [Executive summary:
    The author of this is daft and clearly ‘tired and emotional’. Russia is in competition with OPEC so why would it co-operate? Duh.
    The idiot author is still on about the boogeyman Russian interference in 2016 yankee doodle erections when already well shown to be false.
    The pantywaist who drivelled out this crap above should be honest and say – if the oil price drops below $30 per barrel then fracking is uneconomical and it will make all hurty the USA companies that are doing it – but being MSM this drongo simply repeats the same old shit like the drug-addled media whore he is .
    The pantywaist ‘author’ is trying to bag Russia while protecting human rights abuser Saudi Rabies; which is what the USA taxpayer pays the USA army to do and the MSM to falsely report on]

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