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Industry

The Shaky Understanding Between Saudi Arabia and Russia

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In the oil industry, the intensity of the rivalry between Saudi Arabia and Russia has increased over the past few years, especially with the price per barrel of oil being sliced in half. Constantly jockeying for position as the world’s top two oil exporters, the strategy in taking on this economic setback hasn’t yet found a solid solution.

Russia’s economy is strongly based on the economics of oil, while Saudi Arabia is in the midst of trying to diversify. While the Saudis haven’t emerged unscathed from the price drop, they’ve previously ignored requests from OPEC to cut back production in order to reduce the glut.

That’s fallen in line with the approach of the Russians, who don’t belong to OPEC. That philosophy is based on the revenue needs of the country when it comes to any sale of any oil, though profits that had previously been made have been severely reduced.

Dealing with the continuing problem led the two countries to agree at the G20 Summit on September 5 to come together to keep a closer watch on the oil market. The first steps are focused on stabilizing prices to keep them from falling as low as the $28.50 floor reached in January, which could mean a production cutback.

While some are hailing this as a new era in the industry, many industry experts are skeptical that this will lead to any real change. For one thing, the specter of Iran’s refusal to make cutbacks makes full cooperation from OPEC questionable at best.

Those experts believe that any positive news stemming from this agreement will only last a short period of time. That belief was reinforced by the three percent jump enjoyed in the immediate aftermath, followed by a return to the previous prices.

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