The US oil companies are suffering from a catastrophic collapse in commodity prices. But the United States is absolutely not ready to stop the oil war from the economic point of view.
This was told by a professor at the Harris School of Public Policy at the University of Chicago, Ryan Kellogg, in a commentary given for Forbes.
As News Front previously reported, the spread of coronavirus infection COVID-19 led to the reduction in oil demand, which, together with an overestimated supply, provoked a collapse in prices. An attempt to limit the extraction of raw materials within OPEC also failed. So in the world the fourth oil war began in the last 35 years.
For the United States, the situation is aggravated by the fact that a significant part of the US oil production is the shale segment, which becomes unprofitable in the face of a collapse in prices. The situation has reached the point that there is no room left in the American oil storage facilities, and the miners are ready to pay extra for the “buyer” to take out the raw materials.
According to Kellogg, if earlier drilling new wells for shale oil production was at least “not a hopeless way to earn money”, now everything is exactly the opposite. Against this background, in Washington, an opinion is increasingly heard that the American administration needs to “hard push” Russia and Saudi Arabia to a deal to reduce oil production. This position is shared even by Donald Trump. Moreover, there was already a proposal to include Texas in the deal. Thus, the US authorities could coordinate the situation in the oil market.
“These kinds of ideas are terrifying for the United States and oil consumers around the world. Moreover, oil industry workers will no longer be able to help, but a negative precedent will be created, ”the expert says, stressing that the US should“ not stop the oil war in OPEC, but help it. ”
Kellogg explains his position by the fact that the cessation of confrontation in the energy market will lead to a rise in price of oil and, as a result, oil products, which the US economy is simply not ready for. If oil goes up by just $ 1, Americans will have to spend $ 15 million more each day. The expert recalled that this will happen at a time when US residents are experiencing serious income difficulties.