Editorial: Full Barrels & Lean Cows - An Oil Famine Of Plenty

Tim Haïdar

Last week Brent crude slipped beneath the $80 per barrel mark to a four year low and the price of West Texas Intermediate (WTI) plummeted to $73.

Nine days before the 12 member states of the Organisation of the Petroleum Exporting Countries (OPEC) gather in Vienna, two factions have emerged within their ranks: one backing $100 a barrel crude, the other happy with its current value.

It is likely that the Saudi-dominated GCC faction will come out on top, taking the hit of a lower oil price and reduced revenues to maintain its position of prominence in the global oil continuum.

And while this may well damage the development of projects of a more fiscally-demanding nature in the West, it will also punish Russia to the East. So much so that the eminence grise of Vladimir Putin’s administration, Rosneft’s Igor Sechin, is meeting to powwow with OPEC representatives two days before their official meeting – presumably to ask, albeit with stern brow, for some form of clemency.

Many inside the Russian political fold still blame Saudi Arabia’s fourfold production increase in 1985 as the catalyst for the breakup of the Soviet Union. When oil fell below $20 per barrel for a period of four years in succession, central Soviet coffers ran dry on losses of almost $20 billion per annum.

In 2014, half of Russia’s government revenues are hydrocarbon dependent, and the world’s eighth largest economy will not welcome a repeat of the financial consequences of perestroika.

Halliburton’s recent takeover of Baker Hughes and General Electric’s mooted swoop for National Oilwell Varco stand to prove that a 30 per cent oil price reduction can lead to predation in the business sphere as well as jitters on the geopolitical stage.

In the "years of lean cattle" that lie ahead, former superpowers could be cowed and maybe even a supermajor or two could be corralled and consumed in the famine....

Could a continued oil price reducitonm lead to the fall of nations and the cannibalisation of some of the industry's biggest names? Have your say here

Tim Haðdar is the Editor In Chief at Oil & Gas IQ. Reach Him At Twitter Or OGIQ


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