Energy expert Boris Martsinkevich spoke about the consequences of the decision of the OPEC + countries to reduce oil production in the markets and will this decision lead to inflation in the world? and whether the decision was made for political reasons.
What is behind the OPEC+ countries to cut production? Political or economic motive?
Boris Martsinkevich, editor-in-chief of the Geo Energetika website specializing in energy issues, said in an interview with RT: “It seems that the goal of cutting production is to keep oil prices at a comfortable (acceptable) level. for consumers and oil producers. And in light of economic downturn fears in the US, the European Union, and the problems in the banking sector caused by the increase in interest rates by central banks, the decision is very logical.”
The energy expert added that the producing countries in OPEC+ have risen to the point that the growth of the Chinese economy will not outweigh the negative trends that have developed in the economies of developed countries, so the countries of the group decided to cut production in a preemptive step, and he said: “It seems , (OPEC+) sees that it does not make sense to rely on the growth of the Chinese economy after the pandemic to outweigh the negative trends in America and Europe, so I decided to cut production, since the accumulation of excess production would lead to a fall in oil prices, which does not meet the interests of oil-producing countries.
He pointed out that after the announcement of the decision, oil prices rose to the level of 80-90 dollars per barrel, which is a comfortable level for consumers and oil producers in the world.
Will the United States increase oil production?
The expert Martsinkevich believes that US energy companies will make a decision based on their economic interests, which may conflict with the political interests of the US leadership.
He said: “In the US, oil is produced by private companies, not the government, and the decision to increase or decrease production is made by these companies, not by the American president or political blocs. How will American energy companies behave? they will proceed from their economic interests, as experience has shown that the economic interests of companies usually do not coincide with the political interests of the American leadership.
The expert added that US energy companies are in a comfortable position with the price of a barrel of US oil above $80, indicating that US producers will not increase production, which will lead to higher US fuel prices.
He pointed out that the US government has no tools to influence the price of gasoline in the country, since it has depleted about 40% of its strategic oil reserves, and the US government’s decision to fill the reserves at $70 per barrel did not receive a dull response. ear from US energy companies.
Will production cuts lead to global inflation?
The veteran energy expert said: “Oil prices in 2022 fluctuated between $80 and $90 a barrel. Now prices have returned to the same level, and therefore there are no major shifts (in the global economy) this year.”
The expert explained that “inflation in the US and Europe is not only related to oil prices, as the index is affected by the course of events in all markets. If this strategy changes, inflation will continue to grow.”
Martsinkevich pointed out that the rise in inflation in European countries to double digits is not the fault of Russia or OPEC, but rather is the result of many years of incorrect policies pursued by Europe in the field of energy, and said: “I do not think that oil will significantly affect inflation in the USA or Europe.
Last Sunday, Russia and eight OPEC+ countries simultaneously and unexpectedly announced an additional reduction in oil production by about 1.65 million barrels per day, starting next month, to achieve stability in the global energy market.
Voluntary reductions will begin next May 2023 and will continue until the end of 2023. This move led to an immediate increase in the price of black gold by about 5%.
Source: RT