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Crude Economics
Putin and Maduro Talk Energy Collusion in Beijing

Speaking on the sidelines of today’s military parade in Beijing, Russian President Vladimir Putin and Venezuelan President Nicolás Maduro discussed the enormous problem both of their respective petrostates are currently facing: the crashing price of oil. While a member of OPEC, Venezuela has been vocally unhappy with the cartel’s decision (pushed by Saudi Arabia) not to set a floor to the oil market by cutting oil production. Meanwhile, Russia’s economy is reeling as it’s hit by both Western sanctions and falling revenues from oil exports.

But one senior Russian official poured cold water on the notion of any bilateral effort to tinker with the global oil market, as Reuters reports:

A senior source at the Russian government played down the significance of the meeting, saying the presidents would mostly discuss mutual cooperation and Russian ties with the Organization of the Petroleum Exporting Countries (OPEC).

“They (Putin and Maduro) will exchange their views on the oil market, that’s it. It is highly unlikely that any measures will be agreed to prop up prices. How can you imagine two countries cutting their production? Their market share will be quickly snapped up by others in that case,” he said.

For his part, Venezuelan president Nicolas Maduro simply said he had some “not bad ideas” on the question of how to stop the slide and stabilize the price of oil, but it’s hard to imagine either country constraining its supply (in fact, Russia already said this week it would not purposefully cut production). With that option out of the window, there’s little else to do but hope other producers might cut theirs—either the Saudis by strategy or American shale producers by necessity—or else wait for an uptick in global demand.

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  • Jacksonian_Libertarian

    “With that option out of the window, there’s little else to do but hope other producers might cut theirs—either the Saudis by strategy or American shale producers by necessity—or else wait for an uptick in global demand.”

    I think there’s a 3rd and more likely option, the Government Monopoly owned State Oil Monopolies of OPEC’s aging oil fields continue to degrade and produce less, as the monopolies maintenance and development budgets get cut to the bone. All while the small entrepreneurial American shale oil developers stun everyone with with their resilience and continued development. This will be a pure example of the strength of Free Markets over Monopolies. And a demonstration that the “Feedback of Competition” provides both the information and motivation which force continuous improvements in Quality, Service, and Price in free markets.

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