Trump and Putin only talk about falling oil prices
US, WASHINGTON (ORDO NEWS) — Well, here comes the surprise. On Monday, during a telephone conversation, Presidents Donald Trump and Vladimir Putin “agreed on the importance of stability in the global energy markets.” However, it is very unlikely that they will go beyond praising stability and hope (or pressure) on someone else in the expectation that this someone else will deal with this issue.
According to the Kremlin, energy officials from the United States and Russia, the first and third largest global oil producers, will hold discussions – although they did not specify exactly what issues they might touch on. But do not expect these discussions to lead to anything. None of the presidents is notorious for its state of perspicacity or compliance.
Putin’s latest diplomatic “successes” include the annexation of Crimea and the sending of troops to Syria to support the Bashar al-Assad regime. And Trump has become a great expert on pointless camera poses – especially with North Korean leader Kim Jong-un.
In the energy sector, disagreements between the two leaders include Russia’s participation in the export trade of Venezuelan oil, US sanctions on the Russian oil and gas industry (in particular, the Nord Stream 2 gas pipeline from Russia to Germany), and other disagreement issues that serve as an obstacle to foreign investment in Arctic oil and gas projects. As well as Russia’s own nascent shale industry.
Putin is not interested in giving another chance to save the US shale sector. Trump still believes that the problem arose as a result of the fact that Russia and Saudi Arabia “went wild” and started a price war.
Let’s clarify something. The collapse in oil demand as a result of the global response to the COVID-19 virus is a much more serious problem than the increase in production threatened by Saudi Arabia and Russia, which have not yet produced a single additional barrel. When planes stop flying and drivers stop traveling, these countries, like everyone else, will struggle to find buyers for their oil.
Saudi Arabia is already threatening to increase its exports in May by 600 thousand barrels per day, since this oil is not needed by its own refineries. It’s just extra – no one needs oil, for which they are trying to find a buyer.
Goldman Sachs investment bank estimates that global oil demand this week fell 26 million barrels per day, or 25%. This is more than the United States, Canada, Mexico, Central America and the countries of the entire Caribbean consume together.
Unfortunately, the loudest statements in America are still made by those who urge the use of intimidation tactics against other world heavyweights.
In a letter sent to Secretary of State Mike Pompeo last week, six Republican senators, including Lisa Murkowski from Alaska and John Hooven from North Dakota, said Saudi and Russian decisions to lift mining restrictions were called an “economic war against the United States.”
Lawmakers argue that “Saudi Arabia must change course,” although they do mean that the kingdom, led by Crown Prince Mohammed bin Salman, should return to its previous course. And they call the entire range of pressure tactics the US has at its disposal to force it to do so – from the threat of “duties and other trade restrictions to investigations, safeguards, sanctions and more.”
I understand that senators from the oil producing states want someone else to cut production to maintain high oil prices so that their local hydrocarbon businesses can continue to operate. But the Saudis may well argue that the current situation would have been easier to handle if the United States had not doubled its oil production in less than ten years.
Attacks on Saudi Arabia and Russia because they behave in the way that American leaders have always forced them to do – by removing the “artificial” restrictions on their oil production – will not resolve the crisis faced by oil producers around the world. As I wrote on Sunday, now we are getting a free oil market. Sanctions or tariffs cannot solve the problem of the collapse of demand caused by falling oil demand as a result of the response to the COVID-19 coronavirus pandemic.
The Big Three of world oil producers may have had a chance to come together to develop international measures in response to the temporary loss of oil buyers, but they missed it. Be that as it may, the main blow will be taken by those companies (and countries) that cannot find buyers or storage facilities for their oil. Neither intimidation nor sluggish, lacking interest diplomacy can change this now.
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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.