par far wrote:What does this mean?
What can Russia do here?
There is no comparison with the situation during the 1980s when Saudi Arabia cranked up production and drove world prices
for oil down for a sustained period of years. Today Saudi Arabia does not have anywhere near the spare capacity it had
in the 1980s. All their new field development has produced heavy sour crude. Anyway, the Kingdom of Saudi Arabia can't
even crank up its production by 1 million barrels per day.
Since the 1980s, world demand for oil has gone up significantly but the supply has barely kept up. We have been on a
plateau in production of crude and condensate globally since 2006. There has been a surge in US production from non-conventional
sources in the last few years, but that is not enough to service the world. So crashing oil prices indicate economic recession
and oil futures shenanigans.
If the world oil price crashes too much then all of the non-conventional US production will become non-viable economically.
So do not expect the oil price to crash and stay depressed for years. We are going to see a crash in production if the price
gets too low.
Russia has nothing to fear. The oil price will not fall to $50 per barrel. It might bounce into the $70 range for short periods
of time, but then it will spike back to over $110. It's a supply constrained market. Global demand is not dominated by
discretionary consumption and most of the demand growth has been from China, India and other developing nations. They
are not going stop consuming especially if the price drops.