Andrey Cherkasov: The game people play with oil

The dramatic games around the world price of oil have been lasting for a month already, and it seems that they will be won by those who produce oil. Here is a short background of the situation.

The price of crude dropped suddenly on the stock exchanges of America and Europe in the beginning of November: the price fell below $15 per barrel. There were several reasons to explain the drop, but our “most trustworthy and democratic mass media” named the only two: the instability in the Middle East and the anti-terrorist operation of the USA in Afghanistan. It is impossible to believe this assertion, for these reasons should explain an increase in the price of oil. If there is less oil, then it should cost more. The OPEC countries addressed other oil-producing states with a request to decrease the volume of oil extraction. This suggestion, however, was not approved of by the Russian government. Premier Mikhail Kasyanov claimed that the country’s budget would not be touched even if one barrel of oil cost only ten dollars. It is hard to understand his logic here. Where was the Russian budget going to get the money from if the budget was presumably based on the export of oil.

It looks like the only objective for Kasyanov’s government was to deliver oil to the West, at any price, ignoring Russia’s losses. The OPEC countries also realize this very well, as they are threatening Russia with a rise in the extraction of their own oil, which implies the reduction of the oil price down to the level of ten dollars per barrel. This would mean the collapse of the entire Russian economy, which is relying on the petrodollar.

This struggle lasted for a month. Finally, the Russian vice-premier of the Russian government, Aleksey Kudrin, stated that Russia was decreasing its export of crude export to the world market by 50 thousand barrels a day. However, the world price on oil was still decreasing down. Therefore, a group of our most respectable petroleum tycoons, LUKOIL’s president Vagyt Alekperov first and foremost, had a meeting with President Putin. After the meeting with the president, they had a meeting with Premier Kasyanov, and the Russian government announced that Russia's export would be cut by 150 thousand barrels a day during the period January to March of the year 2002. The oil price jumped up to the level of $20 per barrel immediately after that announcement. OPEC countries welcomed the decision, having confirmed their might in the stabilization of the prices: they were going to reduce their oil extraction by 1.5 million barrels daily.

The governmental press departments released their statements and comments on the score, saying Russia would work in the form of a dialogue not only with the OPEC countries, but also with the leading purchasers of oil. It was also added that the further reduction of the Russian export was also possible too, depending on the situation on the world crude market.

This is what it is all about. The main reason of the oil price reduction is the economic crisis in Western Europe and America, not a chase after Bin Laden, as they tried to convince us before. Even a child can understand that military hardware uses much more oil during war than during the time of peace and that the Afghani operation could only raise the oil price, but never reduce it.

Thus, the Russian petroleum tycoons convinced both the government and the president not to insist on the reduction of the Russian extraction, but to talk about the reduction of the export. This was a wise decision to make. To cut the oil extraction by 150 thousand barrels a day during the winter time has a very big risk of creating a fuel-supply problem in Russia. Well, it has been proven again that you must think of yourself on the market and not about the things that America tells you.

Andrey Cherkasov PRAVDA.Ru

Translated by Dmitry Sudakov