In March this year, there was a dispute over the price of oil in Saudi Arabia and Russia. Saudi Arabia wanted Russia to reduce oil production so that falling international oil prices could be handled. But Russia was not willing to reduce production.
Saudi Arabia had also decided to increase production and sell oil prices by discounting it. Saudi Arabia took this decision when all the businesses in the world were stalled due to the Kovid 19 epidemic. Both countries were blaming each other for the fall in prices. Russia’s state television was blaming Saudi Arabia for the fall in its currency ruble.
On the other hand, Saudi Arabia had also decided to reverse. On April 1, Saudi national oil company Aramco said that it would produce one crore two million barrels of oil every day.
This was 26 percent more production than the agreement with Russia. Saudi Arabia felt that it would prove itself as the king in the price war with Russia.
There have been two important changes in the world of oil in the last three years and their impact has been very wide.
The first is that the production of oil in America has increased. This production has increased so much that the United States has become an important oil exporting country from a major oil importer.
Second, the cooperation between Russia and Saudi Arabia to keep oil prices stable. The United States, Russia and Saudi Arabia are the three largest oil producing countries in the world. America is at number one and the rivalry between Russia and Saudi keeps on going. Cooperation between Russia and Saudi Arabia has been badly affected in recent times.
The Organization of the Petroleum Exporting Countries ie OPEC has the highest dominance of Saudi. In March, Saudi Arabia proposed to cut oil production through OPEC due to the huge reduction in oil demand due to Kovid 19.
Russia is not a member of OPEC and refused to go along with Saudi’s proposal. After this, there was a price war on oil in both countries.
Heavy drop in oil demand due to epidemic
US shale oil is a challenge for both Saudi and Russia. Although the production of shale oil is expensive. But due to the production of shale oil, America became the largest oil producing country from the world’s largest oil importer.
Due to the expensive production of shale oil and gas, Russia feels that no one can challenge its market. Compared to conventional crude oil (which is in Russia and Saudi Arabia), shale oil is extracted from the layers of rocks.
Conventional crude oil escapes to a depth of 6000 feet while shale oil production is complex. In 2018, America became the world’s largest oil producer, surpassing Saudi Arabia. This rise of the US also affected the oil market of Saudi and Russia.
When the Kovid 19 epidemic came, there was a huge drop in oil demands. In view of this decline, Saudi Arabia and Russia had to agree to drastic cuts in oil production in OPEC and OPEC Plus. America also had to cut its production by 2 million barrels per day. Although the US and Russia’s oil production or export is less, it does not matter as much as Saudi Arabia. Saudi Arabia’s economy is dependent on oil and as soon as the market of oil is affected, its kingship is shaken and fears about the future begin.
After America, Russia shocks Saudi Arabia
Saudi’s oil production and export are facing a tough challenge from Russia along with the US. First, the US pushed Saudi to number two in terms of oil production and now Russia has brought Saudi to number three. According to the Joint Organization Data Initiative (JODI), Russia has ranked Saudi Arabia third in terms of oil production in the month of June.
With this, Russia has become the second largest country in the world in terms of oil production after USA. According to JODI, in the month of June, Russia’s oil production stood at 8.788 million barrels per day, while Saudi Arabia’s was just 7.5 million barrels.
In June, the US topped in oil production. According to JODI, oil production in the US was 10.879 barrels per day in June. Saudi Arabia’s oil exports are also steadily declining. Saudi oil exports fell below 5 million barrels per day in June. According to JODI, its oil exports declined by 17.3% in June compared to the month of May.
Saudi oil exports in June stood at 4.98 million barrels per day. Saudi oil production was 6.02 barrels per day in May and 10 million barrels in April.
Now the challenge for Saudi Arabia is as big as how to reduce the dependency of its economy with oil.
The ambition of the Crown Prince of Saudi Arabia is to make Saudi stand on the money without oil, but nothing has happened yet.
Jim Kraen, an energy affairs specialist at Rice University Baker Institute, told news agency Reuters last year, “Saudi Arabia is addicted to oil and is still not weak. The Saudi economy is running out of oil. GDP oil The business is underpinned. “Arab leaders know that high oil prices are not forever.” Four years ago, keeping this in mind, Crown Prince Mohammed bin-Salman of Saudi Arabia introduced ‘Vision 2030’.
The goal of this vision was to reduce Saudi economy’s dependence on oil. The rest of Saudi’s neighbors also know how dangerous it can be to depend on oil. Middle East and North Africa oil revenues are declining continuously.
According to the International Monetary Fund, in 2012 revenue from oil in these areas was one trillion dollars, which increased to $ 575 billion in 2019.
This year, Arab countries are estimated to get $ 300 billion from the sale of oil, but it will not be able to recover their expenses. From the month of March, they are cutting production, increasing taxes and taking loans. Many countries are struggling with the problem of cash. Professor of Middle-East Affairs AK Pasha at Jawaharlal Nehru University also says that the future of Saudi does not assure much. They say that there is talk of alternative energy all over the world and its scope is also expanding. In such a situation, the crisis of the economies dependent on oil is going to increase. The corona virus epidemic has brought the hollowness of these economies to the surface.