Why Russia just torpedoed global oil prices

from PBS NewsHour,

The price of oil had its biggest one-day decline since the Gulf War in 1991 on Monday, plummeting, at one point, by more than 30 percent. That’s not just bad news for the companies that produce oil, it’s potentially devastating for the economies of the countries that depend on it. But, with the rise of the American shale producers who aren’t members of the organization and don’t follow its rules, the OPEC producers alone don’t have the same market sway anymore. In reaction, OPEC teamed up in 2016 with a handful of oil-producing countries outside of the club to make decisions as a cohesive bloc. Russia is the biggest and most important of those countries.

At the beginning of last week, concerned that demand for their product was falling faster than the cuts they’d already agreed to at previous meetings, the OPEC+ countries hatched a plan to cut their supply by another million and a half barrels a day. All they needed was for Russia to sign off. On Friday, 23 energy ministers awaited the arrival of their Russian counterpart, Alexander Novak, to do just that. The Kremlin had a different idea. Moscow had decided it doesn’t want to cut its production any more than it already had.

With the two powers unable to agree on how to share the pain of more cuts between themselves, the other nations balked.

Russia and Saudi Arabia’s pledges to open the taps mark the beginning of a battle for market share.

If Russia had gone along with their partners in cutting production, they would have thrown a lifeline to America’s shale producers that weren’t party to the cuts. Without any of the sacrifice, American oil companies would enjoy the benefits of the price increase.

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