Countries that depend on oil exports say that the drop in crude prices globally is an American conspiracy to push US shale gas into the market. This makes little sense
Did you know there's an oil warIJ And the war has an objective: To destroy Russia,” said Venezuelan President Nicolas Maduro in a live television speech last week. “It's a strategically planned war… also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse.” It's the United States, that has started the war, Mr Maduro said, and its strategy was to flood the market with shale oil and collapse the price.
Russia's President Vladimir Putin agrees. “We all see the lowering of oil prices,” he said recently. “There's lots of talk about what's causing it. Could it be an agreement between the US and Saudi Arabia to punish Iran and affect the economies of Russia and VenezuelaIJ It could.” The evil Americans are at it again. They're fiendishly clever, you know.
We are hearing this kind of talk a lot these days, especially from countries that have been hit hard by the crash in the oil price. last Thursday, Brent crude hit $55 per barrel, precisely half the price it was selling for in June 2014. The Obama Administration's announcement last week that it is preparing to allow the export of some US oil to foreign markets, may send it even lower. (US crude oil exports have been banned since 1973.)
When the oil price collapses, countries that depend very heavily on oil exports to make ends meet are obviously going to get hurt. President Putin, who has let Russia get itself into a position where more than half its budget revenue comes from oil and gas sales (some estimates go as high as 80 per cent) is in deep trouble: The value of the rouble has halved, and the economy has already slipped into recession.
Venezuela, where Government spending is certainly more than 50 per cent dependent on oil exports, is in even deeper trouble — and, like Mr Putin in Russia, Mr Maduro of Venezuela, sees this as the result of an American plot. Various commentators in the West have taken up the chorus, and the conspiracy theory is taking root all over the developing world.
So let us consider whether there really is an ‘oil war’. The accusation is that the US is deliberately ‘flooding the market’ with shale oil, that is, with oil that has only become available because of the fracking techniques that have become widespread, especially in the US, over the past decade. Moreover, Washington, DC, is doing this for political purposes, not just because it makes economic sense for the US to behave like this.
In order to believe this conspiracy theory, however, you really have to think that a rational US Government, acting in its own best economic interests, would do the opposite: Suppress the fracking techniques and keep American oil production low, in order to keep its imports up and the oil price high. Why on earth would it want to do thatIJ
By 2012, over a million fracking operations had been performed in US wells — but in 2012, 2014’s events in Ukraine were unforeseen and the US and Russia were still on relatively good terms. Many oil-exporting countries were worried by the prospect that rising US oil and gas production would shrink American imports and, thereby, cut their own profits, but it was still seen as a supply-and-demand problem, not a strategic manoeuvre.
The operators wanted to make a profit, and Washington liked the idea that rising US domestic oil production might end the country's dependence on imported oil from unstable places so much, that it gave tax breaks and even some direct subsidies to the companies developing the fracking techniques. But that's no more than what any other Government of an oil-producing country would have done.