Explainer | Why did Saudi Arabia start an
oil price war?
South China Morning Post [Hong Kong],
by
Meaghan Tobin
Original Article
Posted By: earlybird,
3/10/2020 10:36:30 AM
Global benchmark oil prices took their biggest single day plunge in 30 years on Monday after Saudi Arabia said it would increase oil production even as global demand has slumped in the wake of the coronavirus outbreak.(Snip)Saudi Arabia, the world’s second largest oil producer, started a price war over the weekend when it slashed crude prices by the largest margin in two decades and said it would ramp up production.
The price cuts come as an alliance between Saudi-led oil cartel the Organisation of the Petroleum Exporting Countries (Opec) and Russia, which had been supporting oil prices, collapsed on Friday with Russia refusing to curb its own production in response to
Reply 1 - Posted by:
PlayItAgain 3/10/2020 11:43:42 AM (No. 341998)
Wondering what this will do to the government of Venezuela.
3 people like this.
Reply 2 - Posted by:
Foghorn 3/10/2020 12:00:50 PM (No. 342026)
Saudi Arabia is like any other business, produce more at less cost than a competitor, the USA. USA cannot produce oil as cheaply as Arabia, so suck it up and move on. Saudi's need to produce oil to continue to maintain their economy and provide for the population. The USA oil independence, Russian oil (they now control Venezuela's oil) has had an economic impact on the Saudi's.
2 people like this.
Reply 3 - Posted by:
Strike3 3/10/2020 12:02:59 PM (No. 342029)
Or a more accurate headline, "Thirty Three Year Old Spoiled Saudi Brat Slams the Stock Market." This kid reached his position by murdering and imprisoning multiple family members. I'll give him another two years on this planet at the most.
1 person likes this.
Reply 4 - Posted by:
SavageRider 3/10/2020 12:11:13 PM (No. 342039)
Saudi’s have to cut the price because their oil is not selling and they have no more storage space. It is difficult to stop and start pulling oil out of the ground.
4 people like this.
Reply 5 - Posted by:
Bur Oak 3/10/2020 12:17:32 PM (No. 342044)
Perhaps the Saudis want to teach Iran a lesson.
4 people like this.
Reply 6 - Posted by:
DVC 3/10/2020 12:38:33 PM (No. 342053)
The Russian government essentially is run off of oil revenues. They export very little in the way of manufactured products, mostly raw materials. Their products are so shoddy and expensive that nobody wants them. When I traveled over huge swaths of the former soviet states, I saw literally hundreds of giant factories, abandoned, they were in every city and every country that I visited. I always asked "What did they make in that factory?" Lathes, tires, shoes, farm equipment, optics, everything. Nobody wants their stuff any more, and all their factories are closed, stripped.
So, how does Russia get money? Selling raw materials, mostly oil and gas. If the price drops, they get less money for the same quantities sold, so they try not to cut the quantity that they sell - they are desperate for money. Russia has been reduced to essentially a raw materials provider for other countries.
In far eastern Russia, I saw a couple of dozen open river barges piled high with raw logs, branches removed, but bark still on, anchored in the Amur River. I asked about them - waiting for the Japanese ship to arrive and take the raw logs to the Japanese sawmills. The other major product in that city was platinum, mined in Siberia within a few hundred miles of there, again, raw platinum exported, not manufactured goods.
Saudis and Russians fighting over oil and producing too much.....what ever happened to "peak oil" and "there will be no more petroleum after 1995" (or 2005? or 2010?)
8 people like this.
Reply 7 - Posted by:
DVC 3/10/2020 12:40:49 PM (No. 342055)
Bingo for #5. The Persians have been attacking the Saudis for a long time, and this is one of the best ways to really, really get back at Iran. Iran, like Russia, is sustained by oil revenues, so lower oil prices is taking money right out of the mullahs' pockets.
8 people like this.
Reply 8 - Posted by:
BeatleJeff 3/10/2020 8:37:10 PM (No. 342414)
So, when can we expect the price at the pump to fall below $2 a gallon?
0 people like this.
Reply 9 - Posted by:
Mushroom 3/10/2020 9:23:13 PM (No. 342441)
#8, in my area gas is $1.80ish, then again, forgive me if I am wrong but I believe you are in California, how much in taxes are on each gallon?
2 people like this.
Reply 10 - Posted by:
whyyeseyec 3/10/2020 9:33:50 PM (No. 342452)
@#9 - Oil companies in CA begin gearing up to produce their 'summer blend' right about this time of year - mandated by Sacramento. The price will not drop here - only increase. Why? Because we're speeeeeeecial. The higher the price the more tax collected by the state.
2 people like this.
Reply 11 - Posted by:
NorthernDog 3/10/2020 9:34:22 PM (No. 342454)
Paid $2.04/gallon this morning. On the way home saw one gas station down to $1.99/gal.
0 people like this.
Reply 12 - Posted by:
DVC 3/10/2020 11:16:39 PM (No. 342505)
#8, $1.94 at one station on SW side of KC today.
0 people like this.
Reply 13 - Posted by:
stablemoney 3/10/2020 11:22:40 PM (No. 342508)
Saudi Arabia wanted to send a message, so they sent a shock and awe message. It has been received. I don't think the parties are going to give their oil away, so something is likely to happen to stop that.
1 person likes this.
Reply 14 - Posted by:
ussjimmycarter 3/10/2020 11:35:18 PM (No. 342520)
So we should see pump prices dropping to sub $1 soon? No? Awwww! Funny, first sign of trouble and the price of crude rises and so does the pump price...but when crude plummets...the pump stays the same? Economics anyone?
1 person likes this.
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