The sharks and the small fish in the oil game!
Who are the biggest winners and losers in the current oil game? Is there a deliberate play on the oil prices that will be for the benefit of some and loss of others who ‘happen’ to be the adversaries of the United States and its allies?
We are probably witnessing the biggest shift in the global energy sector for the last decade or more! The changes have far reaching consequences beyond economics. The huge drop in the crude oil prices from $110 dollars per barrel to (at the time of writing this article) around $45 dollars is affecting the geopolitics of the world.
The biggest winners of this oil game seem to be the United States and Saudi Arabia. The United States is using the new oil production technology called ‘fracking’ short for hydraulic fracturing of shale oil that is extracted from shale rock formations. Therefore it is now one of the biggest oil producers in the world at a rate of around 9 million barrels per day which has driven crude oil price down and boosting its economy. What is Saudi Arabia getting out of this? Isn’t it losing money from the fall in prices?
Saudi Arabia has refused to bow to the international pressure, mainly from the Organization of the Petroleum Exporting Countries (OPEC), to lower oil production rates for good reasons of its own. It is pursuing a stubborn oil policy that has long term consequences, by driving its competitors and political adversaries namely Russia and Iran to the brinks. Saudi Arabia is biting the bullet for the short term and drawing from its large foreign currency reserves for now to gain bigger gains in the future.
Politically, both Saudi Arabia and the United States seem to have teamed up to exert eco- nomic pressure on Russia and Iran to bow down and make concessions if not more. This tactic, in my opinion, is wiser than military action and direct force and may eventually drive Vladimir Putin out of office.
Economically, Saudi Arabia and the United States are the sharks which are going to eventually devour the smaller fish, that are the smaller oil producing countries and companies, which won’t be able to sustain a prolonged drop in crude oil prices.