How low can all prices go crude oil drops below 30. 00 a barrel as a price war between 2. 00 of the worlds biggest producers worsens how badly will that hurt the Global Economy already suffering from the coronavirus pandemic this is inside story. Hello and welcome to the program im norrin taylor the coronavirus pandemic is triggering fears of a global recession businesses around the world a shot stock markets are suffering massive losses on top of all that an Oil Price War between 2 of the worlds biggest producers the dispute between saudi arabia and russia is already pushed the price to its lowest in 4 years brant crude dropped below 30 u. S. Dollars a barrel on monday Global Demand for oil was already low since governments imposed widespread lockdowns and airlines grounded flights because of the disease you know a cartel opec and the International Energy agency both warn that developing countries such as algeria and go and venezuela could suffer the most losing up to 85 percent of the oil and gas revenue this year. Or the price for started last week when russia rejected plans by saudi arabia to cut Oil Production the kingdom and other opec countries want higher oil prices. Following the drastic drop in demand because of the coronavirus pandemic saudi arabia responded by announcing plans to pump much more oil at hugely discounted prices last monday brant crude recorded its biggest one day price fall since the one 991. 00 gulf war Investment FirmGoldman Sachs warns prices could fall to 20. 00 a barrel both the saudis and russians say they can survive the price crash by relying on their foreign reserves of around 5 100000000000. 00 each but experts say Saudi Arabia Needs Oil prices at around 82. 00 a barrel to balance its budget russia needs around half that. Now lets bring in our panel joining us from ban in switzerland cornelia mire an economist and c. E. O. Of my resource which is a specialist consultancy on oil and gas from london mamdouh salami an International Economist and visiting professor of energy cannot mix at your Business School and from providence in rhode island jeff colgan associate professor of Political Science at Brown University welcome to your starting off with you Cornelia Meyer just take us back to the origins of this why is saudi arabia doing this well as you might recall there was an ok meeting opec last meeting opec last 10 nations led by russia even under 6 of march and saudi arabia had pushed very hard opec passed has balanced the market for the last in strength to 16 pretty accurately putting on oil in need of taking off oil when needed and the saudis saw how dire the situation wasnt going to take and other 1500000 barrels a day off tomorrow could come koolaid with a 2100000 barrels they have taken before. That the russians would not play ball and saudis said look we are were not always going we almost take the brunt of it but we cant do this alone so what happened to stand overnight we came from a situation where opec class was balancing the market to a situation where we had a war for market share between saudi rush and all sorts of other people and you know combined with that demand was anemic to start it was combined with the disaster of the coronado direst this is the perfect storm in the oil markets. Do you think were any closer to any of these sides changing their minds i mean coronavirus have as happened in the meantime. Could we could we come back from this you think well this is really a story in 3 stages right because the coronavirus hit asian demand came in february then we saw the collapse of negotiations in opec plus principally between saudi arabia and russia but the 3rd part of the story is really whats going to happen to demand for oil in the United States and in europe over the next few months as coronavirus bites in those markets as well and so its possible that we could see Oil Prices Drop even further down into the twentys or even in the teens because were getting a combination of both a demand shock and a supply shock at the same time professor. In your view to saudi arabia whats that kind of the gamble for them is that they can ride this out is that a gamble that you think is sensible for them at this at this stage and you think were going to have to revisit it in the current climate could prove the biggest gamble in their lives and it could bankrupt the saudi economy not a man but in 24. 00 of the team yes i would be happy again so many. Of you know whether the whole of the market with all of them in defense of its market share. Brendan see through completely and be counted and saudi arabia has flourished to this that. Psyche and to contact russia and were sort of then i dont know what became as you put it best team titles. If fake still occasionally now this time saudi king of this has. Lead me to do plenty for now test south america. Cannot slap the little. As it did in plenty for the girl it does not have the capacity to produce. It is starting above she has. Served all of that and if she implements. Them very. Little. In the future this is going to be a sergeant trapeze artist according to my looks like you might disagree with with the point that saudi arabia if you think they can actually write it out you think its not so much of a gamble i mean look at the low cost producer and always when you have to use when you have to use epic moments its always the lowest cost producer you can write it out but it comes at a humongous cost and i think whatever could you see now you can produce. About what it would hurry for me when i saw course of slashing its cap ex its Capital Expenditure by 25 percent and lets not forget saudi aramco us about 12. 00 to 14000000000. 00 a year just to maintain production because you know when you have to climbing fields you need to put capeks in there to maintain production at a certain level so i did it can be a lot but i think its going to be extremely costly to the country to call them that human clearly one of the in intentions i suppose of origine of russian and saudi arabia was to perhaps hurt the u. S. Shale industry what are what are they feeling at the moment from this. But youre exactly right that the United States oil sector was the principal target of this regardless of what russia saudi or arabia would say on it and theres no question theres a lot of pain in the u. S. Oil sector you have republican senators writing to the king of saudi arabia asking the country to change its course and to intervene in a different way in the oil sector i dont expect that. To be successful but its remarkable how you know just a few months ago president talk trump was talking about the United StatesEnergy Dominance in the Global Markets and now things are really a different story and it reveals how president trumps claim was pretty much an illusion the whole way along. This is how may is it your view that this can go you can continue to go further whats your kind of estimate of how low the prices could go as long as the problem got us to believe on 10 years we can have that key home ice you know a rise can decline iran would have to own a sled would be going to well in market as saudi arabia is such jesting. I love that however if you know. What i shall was absolutely right. He gave all of the thoughts by i think last because this is even realized that any good thinking of that thats well i mean we want thats what. Theyre doing it really have no plans to impact brands as well as you call them a violinist was going to kill you im going to present an ashtray i can send her i was in a warehouse and cant live with them. I am proudest of 25 below or less for many humans as president putin has done however sound with limbs. And ill say listen im. Proudest of in his heart of levels my research. Actually humans are the 100. 00 events but the international brutality fund less than he said it was in the room who plan to balance the salad and the ram remember last summer 75. 00 brand new friends of rest of the oppressor in january are such sweet land it is 70 sort of sad and he never will remember who the writers were against sasha can never have read below the market will bear think its not a. Venture the bankruptcy of the south corp going to them are just want to kind of go to the kind of the consequences for because normally in these situations you consumers might benefit from oil prices and so on but at this time its its very different isnt it because the airline industrys been hit expect just the kind of the impact that this has in a calm entirely changed world this is this is i mean unprecedented times and it is worse than the Great Depression because at least in the Great Depression a president whose world could throw money at the problem and get people employed now nobody can get employed nobody can go to work as i was as i was waiting to come on with you all scream just send me a note saying that all we suspending flies from to morrow through through march 28th so its its its starting its unprecedented and im always very skeptical when people tell me well how much saudi the saudi budget can. Taking the normal question how much it cant because its very hard to really its a lot of work of a saudi budget its very hard to really express adelaide because we dont we dont have all the data points but it is clear that there are and despoil and there are no winners in this and when where do we pump more oil where do we pump less oil your oil price will go down i would not totally discount the shale my kid go in for when we break yes there will be a lot of bankruptcies but in the doing to last the last downturn in 2418. 00 which the professor mentioned the Oil Companies the shale oil space became muscle mass 2. 7 percent more productive productive to quit activity increase so they will come back what youll see is a lot of a lot of bankruptcies and some of the Big Companies the shells exxons snapping up things for a song so i would not discount them when we come back and just call them what you want your view i mean is there any kind of upside for consumers say from lower prices or from perhaps if chinas coming out the other side of the Creative Arts are present can it help it. Start to restart the engines of growth or do we still in a completely negative picture here. You know i think there are some upsides on balance i agree that the picture is overall negative especially because the Oil Price Fall is coming at a time when stock markets around the world were already so vulnerable but in the medium term the fact that oil prices have fallen and fuel costs transportation costs for businesses around the world are falling thats going to help businesses everyone everything from say amazon delivering packages to your front door to airlines to to you name it those businesses are going to benefit from Lower Oil Prices particularly if we see as was suggested so consolidation in the oil sector in north america and i expect that there will be quite a bit of movement in the shale sector and in fact even in the conventional Oil Production in north america is probably going to get largely affected as well but ultimately it is correct that its not like the oil sector is going to be completely wiped out here there will be a rebound over time and understand i may do you agree with that perspective not having them take the sort of. Serious it would be glad to know what actions would better think much she says of the little. Homes and let them have to use that anything 2nd. Chances are a lesbian and gives him a plan by the tsunami that. All impressed the class because governments were dressed in. China. That some of them sense some of that i remember when they took them to a battle in the u. S. Branches nobody. You know from here on set a consensus. Passes. But it isnt the level he thought i was in the u. F. C. Many professions but plan would play at a. Higher prices and i have the 3rd of the price is one of the top of that and plenty of balance and i really hate the guy because he thought im what is. Chungs the if that means. Youre Single Missions september. The best. And best mens of the world. As we have seen him play. Are a very good and the better mind by a weekend of. Just a hazard of a step ahead just to bring in. Corner him are just want to ask you which of the countries are most at risk from lower prices took us through them in countries like iraq where where do you see the biggest hit from this kind of a shock certainly iraq etc scare me ive just come out there like smaller countries like as a biter and i dont see how they can winter storm the countryside are smaller and if you research. Ethics reserves and are totally depend for derek economists on their oil exports they are most at risk but you know when you look at it in terms of benefiting anybody how can it benefit anybody anybody in the economy that you know how the question will be how Many Airlines will we have left after. Just going to say us pessimistic is that you think we were left with no actually no airlines. Well i think i mean in general all 3 of us are saying that this is going to be a negative shock for some time and in fact the longer that there is a quarantine and a lockdown of fact coming from the corona virus the harder it is for the benefit of low fuel prices to translate to the wider economy but it is not all doom and gloom and i think that the medium term effects of this are in fact real the question that we havent talked about yet i mean theres 2 things really one is that i think in terms of countries that are hit hardest by this its probably those that are in africa right so nigeria algeria and goal those countries are heavily dependent in terms of their government revenues on oil prices and theyre going to struggle so we may see very significant effects in africa but the other thing that we need to think about is Climate Change and how this becomes an important part of the story for the Energy Transition towards renewals that was already going on now were moving into a world where we could see Lower Oil Prices for quite some time and thats going to affect the investor prospect and enthusiasm for technologies like car batteries and electric cars under saddam a on that issue of africa being one of the west hit areas what kind of remedies the governments have that isnt many of them do it rely on the revenue from oil to to fund kind of Health Services and so on. And france is and ive said it is bad of the economy that it was. In this courtroom as all of us and we ask a question of the right school. Is the i mean we have mentioned them weve got who do you have any kind of when they added. Sense is the economy are sound really. You know with the price went up and they sent them. Naturally i got them to this and im not a producer says. So i dont. Have any kind whatsoever to. Have an example in its just go and just want to bring you back you know i mean how where do you see any kind of potential kind of climb down because these are saudi arabia russia india big big powers that want to these face what what would be the scenario where they could say actually weve changed our minds and we might adjust our policy on this can you can imagine a scenario that yeah its going to take some months for that to play out i think and i dont expect to see it anytime in the short term but the probably the brightest prospect and to the extent that it is possible the bride is prospect is if there is Significant Movement in the u. S. Oil sector right so thats been the target from day one and if we start to see a significant number of either bankruptcies or mergers and acquisitions. And sort of Weaker Companies being bought out by the stronger ones thats where were going to see ok russia and saudi arabia might start to see that theyve theyve had the impact that they want to have and only then would they start to consider ok is demand starting to rise after the coronavirus shock so with those 2 factors in place rising demand and consolidation in the u. S. Oil sector then you might start to see saudi arabia and russia come back to the bargaining table and talk again canadian what do you think it will take to get russia and saudi every back to the table. I think if it gets a lot worse russia and saudi arabia will come back to the table i think where saudi arabia just put a stake in the ground as if they say that we have taken the brunt of all the cuts we have suffered in terms of market share we cannot do this alone and russia for its own internal reasons. Didnt play ball this time and when it gets too bad and weak hits russia too high they will do it too i think theres also lets not forget this also to keep 20 both saudi saudi is the presidency of the cheap 20 right now russia is in the cheap 20 so we have all the the Major Players in the cheap 20 so so so something sad some stage they might get to get it and i just have a board of caution on oh its a good day when they see too much pain. In the shale space you know when you have constantly day should to begin players will snap them up and day will be able to use the scope and the scale of the corporation of an excellent a Formidable Force of a shell so watch that space when things you know rebound shale may come back right significantly and it would not be deferred this time that we are surprised by what you can do ok munda salome what do you think it will take to have these players resolve their differences and perhaps ease things a bit. The saudi economy would settle for selling. Its necklace decision to well into password. And truly stamp and of course that he should leave the ashes so that. Sound that he. Runs that is just bad. As the weapons that is the use of groups or havent you cant. Even tell the market that we. Have them or. Us or the investment is in. So much. More not that we can. Invest and keep it from collapse difficult very briefly who has influenced the saudi rulers to make them change their minds anybody well i think actually the more interesting story politically is in russia right to russia is obviously going to suffer with Lower Oil Prices and Vladimir Putin his own popularity has dropped considerably in the last couple of years so it may be the dissatisfaction economically within russia that puts russia back onto into the sort of negotiating realm and then saudi arabia of course for the reasons already mentioned is certainly going to be interested in stabilizing oil prices but i dont see saudi arabia being the 1st to act on that continuum i would you agree with that is it going to be russia to blink 1st i was be i would absolutely agree with you i would absolutely agree with that and you know if you look at so far saudi arabia has taken so so much of the brunt of the cops and so so so david will want to see some some willing on the russian side and youre right there is the tug of war between its. Intially and also nearest you get a sandwich in and we bake big influence on mr putin and d. And d. Energy minister alexander. Who will will always always always more in the inside of a corporation we will take and this time sanction a state weve invested so much in new capacity we now want to pump but i think everybody was only taken aback by poor enough to cope with corona virus canadian maya thank you very much indeed and thank you to all august so we run out of time unfortunately in my. May and jeff cohen thank you all for your time on the program thank you and thank you too for watching you can see the program again any time by visiting our website aljazeera dot com and for further discussion go to our Facebook Page thats facebook dot com ford slash a. J. Inside story you can also join the conversation on twitter our handle is at a. J. Inside story from a different tailor and the teams here nandan and a half i found out. A Winning Program from International Film made. 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