Russia has (apparently) grown weary of the US controlling the global oil and gas trade. Growing its market share and using its newfound energy independence as geopolitical leverage. All the fracking! Moving in on Europe. Into Russia’s backyard. Well, Putin has had enough.
OPEC’s production constraints will no longer constrain Russia.
According to this Saturday report from Bloomberg News, the Russians are upping oil production to counter the economic leverage against the EU and Russia that President Trump has brought to bear, thanks to his deregulation and unleashing of the US oil and gas industry.
Follow the link for all the finer points but I can sum it up for you in two words. Price War.
Oil prices plunged 30% in early trading after OPEC’s failure to strike a deal with its allies regarding production cuts caused Saudi Arabia to slash its prices as it reportedly gets set to ramp up production, leading to fears of an all-out price war.
International benchmark Brent crude futures plummeted 30% to $31.02 per barrel, its lowest level since Feb. 2016. U.S. West Texas Intermediate crude dropped 27% to $30 per barrel, also its lowest level since Feb. 2016.
Gas prices are going to drop which is good. In the face of economic uncertainly fueled by fearmongering about a pandemic, cheaper energy will help float the economy a bit. The bad news is that Democrats will see this as an excuse to raise gas taxes which, unlike the price of oil and gas, will never go down.
Frackers may also find themselves shutting down wells. While the break-even point has dropped significantly since we started covering the topic in the early part of the last decade, there is still a point at which they stop making money.
The good news to that bad news is that these operations do not sit on their hands waiting for the price to rise. Free market Frackers keep looking for ways to increase efficiency to lower production costs.
And while they are doing that, oil prices could drop to lows we’ve not seen in a generation. And whether we get there from here or not, nations like Iran and Venezuela can’t afford to prop up their tyrannies on prices that low.
And who knows. Maybe the OPEC cartel falls apart. The end of a global faction that manipulated prices and managed oil politics for decades. All because of US Fracking!
If that isn’t a talking point to make the Democrats snap like twigs… (winning).
| RedState
