The secret to the push behind a new cold war with Russia is expanding US energy markets
Originally Appeared at German Economic News. Translated from the German by Werner Schrimpf
The U.S. oil industry is to looking to Europe for its new sales market. Oil inventories are overflowing and U.S. economic development is disappointing. The U.S. saber-rattling over Russia is well motivated and orchestrated so that the U.S. can acquire the EU as its new market at the expense of Russia. EU politicians remain weak and silent with regard to this situation.
There is a massive global oversupply of crude oil. The International Energy Agency (IAE) estimates that the daily increases add up to approximately 1.1 million barrels per day. The constant increase of inventory volume is not only causing oil prices to fall, but it will have a negative impact on price building at the point when supply and demand balance again.
The current status of the massive over production will continue for some of time. On the one hand, Iran’s return to global markets will increase the oil supply significantly. The Iranian envoy at OPEC made it quite clear that Iran will reject any proposal to limit oil production.
On the other hand Russia, Saudi Arabia, Qatar, and Venezuela have declared their general readiness to freeze production rates to levels seen in January, but they will take this step only under the condition that all major producing countries cooperate. This seems rather unlikely for the time being. One has to keep in mind that even a limit on current production levels would still mean an surplus because global demand is weak.
The first casualties of low prices might be U.S. fracking companies, with their limited financial reserves. Some of those had to close down already, according to the financial blog “Zero Hedge”. The U.S.-based company “Whiting Petroleum” from North Dakota had announced that they would halt further exploration based on fracking technology, and that they would cut current expenses by approximately 80 percent. A similar press statement was released by “Continental Resources”, and another leading fracking company from North Dakota, “Hess Corporation”, had reduced the number of its drilling holes from 17 to just 2.
Saudi Arabia’s oil minister just recently made a statement concerning the competitors from the U.S. fracking business, and rightly said those engaged in cost-intensive production have the option of either bringing down the cost, borrow more capital, or to simply shut down. But maybe there is another option for fracking companies: expand to new markets.
Last February the EU announced that U.S. producers had been granted the permission to deliver shale gas to Europe. European states would now be able to reduce their dependency on Russia and American companies could now enjoy the benefit of exploring new markets.
EU decisions have an impact on geostrategic politics because officials try to weaken Moscow’s influence in Europe. U.S. saber- rattling is therefore anything but a coincidence. Another piece in this puzzle is the foundation of a so-called “energy union”, which was presented just the other day by the EU. The basic principle of it is the empowerment of the EU to patronize single EU member states on any and all energy issues. New energy projects from single states which are not in line with EU interests and the interests of its “strategic allies”, might be easily stopped or blocked right from the beginning.
This post first appeared on Russia Insider
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