Russia’s plan to sabotage the U.S. energy industry

Although the Corona Virus flue crisis as dominated the news and helped to melt down the stock markets, another story has also contributed to the financial woes. Analysts credited much of the Dow Jones 2,000 point melt down a couple of days ago to the oil price situation. The disagreement between Russia and Saudi Arabia over oil production comes down to supply and prices.

The Russians want to flood the oil market for the time being which would put the bite on U.S. oil shale producers. The U.S. producers are dependent upon at least a $50 to $55 per barrel price to remain profitable. Numbers below that result in losses which will make it harder for U.S. producers to maintain their debt structure. A massive financial failure in the U.S. petroleum industry would jeopardize our energy independence. It could also send shock waves through the U.S. banking and financial systems.

Once more “Mother Russia” is out to get us. Now that Putin has been declared the ruler of Russia, virtually for life, it seems that he is feeling his oats with his feeble economy that is smaller than the size of Italy.

It is interesting to note the timing of this. If Trump really is “Putin’s man,” why would he want to start an economic disruption in the United States during an election year? If Putin has so much invested in Trump, why his doing this?

The answer is there was, nor as there any Russian collusion that is credible. Who knows who Putin wanted to be the president of The United States? If I were he, I would have preferred Hillary because she is both corrupt and incompetent. Nevertheless, Russia’s current policies don’t look to be tilted toward the Trump administration. In fact, it is quite the opposite.

The Russians are desperate to keep from going belly up. Their “comfort zone” is about $70 but they’ll take what they can get. Our domestic shale production cost includes original drilling cost amortized over the lifetime of the well; that is money already spent. Current break even prices vary from well to well and state to state, probably ranges from $25 to $90.

For an expert analysis divorced from media hype:

There was a hilarious day-long window where the Russian propaganda machine seized control of the narrative and fooled a host of financial reporters into proclaiming that Russia was going to war with the U.S. shale industry. It is difficult to delineate just how incredulous such a claim is since U.S. shale output has a lower production cost than Russian crude, but hey, people fall for propaganda allll the time.

OPEC tried this stunt 6 years ago, they assumed our frackers needed at least 80 dollars a barrel to be profitable.

When they were still making money at 38 dollars a barrel OPEC abandoned the scheme; it was only hurting themselves.

Our oil industry is market driven and privately owned, most OPEC nations are government owned and depend almost entirely on oil revenue; the cheap barrel price crushes them faster than it hurts us.

This gimmick worked in the 80’s but that was before the OPEC nations adjusted their spending levels to 100 dollar a barrel crude; they simply cannot afford to keep the price in the basement for very long today.

Russia will find this out as well :wink:

I’m not so sure it’s that high; their soverign Fund was only worth about $30 billion in 2014. Today it’s ~$140 billion. The depreciation of the ruble actually helped their companies expand production while everyone else was cutting back.

I don’t think they can force the American shale market out, and certainly I don’t think they can sustain “$25 per a barrel for 10 years”, but they may be capable of making the Saudis bleed a bit.

No one has ever accused Putin of being a smart business man. If he had allowed his country to be “normal” and a part of the world community instead of trying to turn it into “the Junior Soviet Union” he might have become more influential the good way.

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Heh, "Let’s you and him fight… "