The United States has always wanted to dominate the global energy market, but it is losing influence over the commodity markets. How?
In a report published by the Russian newspaper "Vzgliad", writer Olga Samovalova says that the recent call by the US government to the OPEC and Russia alliance - "OPEC +" - to raise oil production rates and reduce prices, is clear evidence of the United States losing its power over the market. global oil.
According to the writer, the global economy has recently begun to recover in light of the easing of closure procedures in various parts of the world, which affected oil prices, as the price of a barrel approached about $ 70, exceeding 2019 prices before the spread of the Corona virus.
But why did the United States earlier want to raise prices, and it is now bothering it to the point that it did not hesitate to appeal to major producers to raise production rates?
Production crisis in the United States
Last year, oil prices witnessed a major collapse due to the quarantine imposed in various parts of the world, which affected the production of shale oil and gas in the United States, where the price of a barrel of oil ranged between 40 and 50 dollars, and the cost of extracting raw materials became higher than the revenues.
And the writer quotes Janis Kivkolis, a strategist at Exante Investments, as saying in this regard, “Last year, it was necessary to raise oil prices urgently to save American producers, especially debt-laden shale oil producers.”
The rise in oil prices helped American shale oil companies to raise production rates, but it hindered the recovery of the American economy (Reuters)
The increase in oil prices helped the American shale oil companies to raise production rates, but this was preventing the recovery of the American economy and reducing inflation rates.
The expert believes that the rise in oil prices contributed significantly to raising inflation rates in the United States, because the price of gasoline in the United States is directly related to oil prices.
The rise in oil prices was a source of concern for the US Federal Reserve and financial institutions in general, as inflation in the United States reached the level recorded in August 2008 during the mortgage crisis.
"Theoretically, the Fed should respond to inflation by raising interest rates, but such a move would cause a sell-off in the stock market, which neither the authorities nor the investors want," Kevculis continues.
US policy change
The writer states that the "OPEC Plus" countries did not respond to the request of the United States.
Expert Vasily Tanorkov says, "Many OPEC countries need to raise prices to balance their budgets, especially given the production cuts under the OPEC Plus agreement. For example, Saudi Arabia usually sets its budget on the grounds that the minimum price for a barrel of oil should be at $80".
During his presidency, Donald Trump supported oil and gas companies through soft loans, trying not to harm the American consumer at the same time.
But with Biden and the Democrats coming to power, American politics changed and the trend became clear toward alternative energy sources such as sun, wind and water.
“This can be clearly seen by the stagnation of the level of oil production in the United States from August of last year to July of this year, on the Despite the increase in consumption for several months and the decline in stocks.”
The author says: “Under Trump, the United States was producing more than 13 million barrels of oil per day, while production has fallen to 11.3 million barrels at the moment.”
America’s call to the “OPEC Plus” alliance to raise production is evidence of the United States losing its authority over the global oil market (Getty Images)
The expert, Tanorkov, returns to explain the reasons for this decline, saying, "The procedures were clearly tightened during the era of the new president, especially with regard to granting licenses for the establishment of new extraction areas. As a result, the investment policies of companies became more cautious, which reduced the growth of extraction fields compared to oil prices."
"This is partly due to uncertainty about the future of the oil industry due to the increasing importance of the green agenda, with producers suffering long-term losses," he added.
Will prices go down?
According to the writer, the United States is about to lose its influence, not only because of oil, but also because of gas.
After years of sanctions and threats, Washington was forced to give the green light to the "Nord Stream 2" project, a pipeline project to transport natural gas from the Baltic Sea from the largest reservoir of gas reserves in the world in Russia, to Germany and a number of European countries .
The steps taken by the United States against the Russian pipeline would have led to the severance of relations with the European Union, so Biden gave in and aborted the American idea of transporting liquefied natural gas to Europe by tanker.
However, experts believe that the situation in the global market is in favor of Biden, as it is unlikely that an additional rise in oil prices will be recorded in the coming period.
“In my opinion, by the end of the year we will be able to see oil prices in the range of 55 dollars per barrel of Brent. But it is difficult to talk about prices below 50 or 40 dollars. Moreover, the actions of the Federal Reserve system will push prices towards decline."
For his part, Tanorkov believes that oil prices will remain in the range of 60 and 70 dollars until the end of this year, and a decrease of less than 60 dollars can only be recorded in the event of a new, large-scale quarantine due to the Corona virus, which is unlikely.