House. Joined by. The democratic nomination i believe we can be down from. The developments in the u. S. Election campaign on al jazeera. Is the Oil Price War between saudi arabia and russia about to end crude prices enjoyed their biggest ever 1. 00 day rally after the u. S. President raised hopes of the troops will Donald Trumps intervention be enough and whats the impact of the rift between the oil superpowers this is inside story. Hello and welcome to the program im Bernard Smith over the past month 2 of the Worlds Biggest Oil producers have been in dispute about how to respond to the coronavirus pandemic demand collapsed after al lines grounded their planes factories shut their doors and countries imposed travel bans crude prices fell further when saudi arabia and russia couldnt agree on cutting supplies to try and force Prices Higher now u. S. President donald trump is suggesting the feud may soon end saudi arabia has called for an emergency meeting of Oil Producing nations some era challenge reports signs that an oil price will between 2 of the worlds biggest producers may and so is the biggest one day leap on record and heres why i think that russia and saudi arabia at some point are going to make a deal in the not too distant future because its very bad for russia its very bad for saudi arabia. Thats very bad i mean its bad for both so i think theyre going to make a deal a deal to cut production in response to the drop in demand from the corona Virus Outbreak collapsed last month since then the cost of crude has fallen to lows not seen for almost 2 decades russia and saudi arabia slashed prices and ramped up production in the fight for market share just as demand collapsed. The current of ours pandemics forced governments to impose widespread lockdowns close factories and restrict travel worldwide some experts say the United States needs the oil market to stabilize so its own industry doesnt collapse it is imbalance that the United States would wish to have to have the price of oil sort out its industry not that thats not collapse and disappear its Oil Production industry. On the other hand also for the consumers to be happy the price will began last month when russia rejected plans by saudi arabia to cut Oil Production in an effort to boost prices saudi arabia responded by announcing plans to pump much more oil at hugely discounted prices both the saudis and the russians say they can survive the crisis by relying on their foreign reserves of around 500000000000. 00 each but experts say Saudi Arabia Needs Oil prices at around 82. 00 a barrel to balance its budget russia needs only half a thought. While it remains unclear what kind of truce if any might be reached what is clear is that current prices are bad he says but buys welcomed the low prices. Attention is switching to the white house where donald trump is under pressure from u. S. Oil executives and congress for more action if saudi arabia and russia fail to agree a marriage or 3 for inside story. So lets bring in our guests in moscow we have mikhail cretien a partner at the Consulting Agency ross energy in london election law the president of Energy Intelligence that is an Industry Analysis company and in Providence Rhode island in the United States jeff colgan a professor of Political Science a Brown University and hes also author of the book petro aggression when Oil Causes War welcome to you all gentlemen thanks very much for joining us i just want to try and remind our viewers of how weve ended up where we are today and ill start with you mikhail if i can ask you did when russia refused to join the opec Production Cuts did russia miscalculate the response from saudi arabia you think yes i believe it was her own and there is the mission of to put down some of saudi arabia and this show industry in the United States and it wasnt all where is the mission of the 1st of all russian. History which has led to the decision to or depart abruptly. Of course im can i ask you jethro russia has previously aligned itself with opec to sort of give it clout politically in the middle east why this change of topic. Well russia did join with opec but if you actually look at the numbers the degree to which it was willing to cut production was fairly small and so when saudi arabia pushed for a larger cut that just wasnt. In russias economic interests and it just blocked from from doing that and so now theyre seeing the consequences of getting into a price war with saudi arabia and well see whether they actually make a deal saudi arabia has made it clear that they want not only russia but other players included and though they didnt name names it seems like theyre interested in having the United States producers and ball and alex so a miscalculation from russia but did saudi arabia also miscalculate the sort of the magnitude of the collapse in demand for oil no i mean i think the saudis are quite realistic on what the market looks like but i mean from their perspective it was very much they had no other choice here because it if russia was not going to join them in this Production Cut and i agree with jeff i mean they the saudis sprung a larger cut on the opec plus alliance than the russians were expecting. But if that if the groups that dot kind of band together the pull off this cut you know the everyone knew the prices were going down so the saudi response was mainly the only one that they had as what they they say in riyadh and. Their whole d intention here is to bring everybody back to the table to get an agreement theres a lot of talk about the saudis flooding the market thats what theyre saying and thats what theyre going to do but the real intention to get everyone back together again have an agreement thats russia and as jeff says and many others as well. If they bring everybody back to the table again will that be an agreement next week because surely the present situation is unsustainable for everybody involved isnt it. I do not think i feel very end or pessimistic about this but theres a lot of this meeting because the russia cannot contribute anything to that we know that for 3 years russia was just 3rd of declaring it was the greece of production in effect it was increase in it and now russia has no decimal to cut down on people who bought the production because of some logical problems technical problems and d well organisational problems of the industry while saudi arabia is not the all new large scale producer but actually cant cut production and increase production very quickly it is a well for the us of all the saudis a production is actually an instrument of influence that oil prices unfortunately this this but theyre still together with the potential of other opec members is not enough to look close down big gap between supply and demand a missile kind of just help get you to explain to our viewers why russia would struggle to cut production theyve got these aging Oil Production facilities in siberia we know about so it would damage the oil wells if if production was halted just explain briefly why it would be practically difficult. Yes really most of the russian oil wells are located in the cold climate that the us in the western siberia and they are not a fallen peons or oil just like so saudi arabia is of oil in saudi arabia if the world produces 1000 tons of davy or 2000 tons gaylor thats a lot of very well in the rest of the average yield or when oil well is 9. 5 tons not 1000000 not sell them just 1. 5 plants they believe and to close down such a whale would mean to see a switch off slow the pumps that are work that was there and in the cold conditions it was means freeze and the well and to really well recover the oil flow it will need a lot of expenses and a lot of labor so Oil Companies pretty hard not to do it they prefer well to produce as much as they can and the the other problem with the rest of it has no resource storage boxes at the store keep or that oil before if there is a before it finds the consumers and alex to share in the house pessimism. Yeah i mean i i think its difficult for the russians to i mean theres technical issues as hes outlined but its also you know there are political issues as well necronomicon issues and the Russian Oil Company is are not all owned by the state. Like in the case of saudi arabia or where they fully own all production from saudi aramco and you know the Russian Companies are quite reluctant to keep keep production back because you know that theyve got you know a number of objectives to reach theyve got bills to pay and theyve been balking at the you know holding a production as theyve had to do for the last last 3 years jeff on the consequences of not finding agreement more severe than if you was a fine one. Well i think alex and mikhail are right that to be skeptical about this meaning today its possible that there will be some sort of deal in quotation marks but this is largely a political game rather than something thats going to change the fundamentals of the oil market and. What were seeing is yes of course producers around the world are looking to react to a low of prices and where its possible to scale down theyre going to do so in that where youve got very high cost production but as mikael points out lots of conventional oil wells cannot simply be stopped you cant put a cork in this like a bottle of wine and then uncorked it later it does damage to the wells and so producers are reluctant to do so unless they really see no other choice and i dont expect a lot to come out of the meeting today if there is a deal the real question becomes whos going to enforce it we know that opec has historically at the members cheat on the greens that are made it seems like the important problem becomes even harder if youve got players outside of opec agreeing to those kinds of cuts as well alex you have donald trump saying that he expects rusher in saudi arabia to jointly cut production by as much as 15000000 barrels a day where does he get these fake a from hes just trying to push these 2 leaders p c n n mohammed bin solomon towards an agreement and why would they do that anyway. Well i mean i think the thing about trump is hes a showman he knows how to play play the media play the sentiment and what he did yesterday was sort of classic trump he put out a statement he shot out of tweets and they will price jumps to historic levels its sort of textbook trump here and now it leaves us all scrambling about whether theres any kind of deal underneath it so you know what we think is going on here is that this is what a classic talking about talks and everybody in the Energy Industry is desperate for for a solution here and i think as you pointed out you know its in everybodys interest to find some sort of solution here its in nobodys interest for oil to be in the 20. 00 range so. The mere sliver of hope that there may be some way of getting these guys back together you know the statement by the saudis saying were going to have a meeting the sort of c. E. O. s meeting of us all companies today all of this says you know theres a possibility something that happened here and trying to sort of fanning the flames here and getting people very excited but you know now comes the hard part can you get all these people together can you get all these countries together can you monitor anything what is agreement look like you know these are a lot of unknowns and you know im not saying theres no substance beyond this or behind it but there are a lot theres a long way to go before were going to get a deal here and i share my hales skepticism that next week were going to have Something Else that stopped i mean we live in unprecedented times you never know but what i think were or quite pessimistic the deal is going to happen in the short term is going to take some time if one is even possible and mikhail is russia in a better position than noting your skepticism your pessimism about any deal is russian a better position to ride this out than the saudis cash wise. Well. Russia is depleting its surface over unfun because of the russian buds of the has been the draft the well afford new price of oil over 42. 40 a sense if the price is all were the proceeds go into the sort of fons it even the price is below all that. Will limit their additional cash what the bugs are easily be in taken out of the summer and fall and or there are over world speculations about how long it can last some of the people in the finance minister said say well who may need some other for 6 years but in their oil industry there is a 1000000000 and it is supported by officials or that enters the ministry of russia that may be here the funds russia has accumulated that will be enough of d for d 18 months or 2 or year or is this is a very very pessimistic outlook and jeff all these unprecedented times that where and suggesting that were opac and opec plus managed even if they reach some sort of an agreement and i know the pessimism all knots would that be enough anyway wouldnt you need some sort of u. S. Cooperation i know the u. S. Cant cut production because of antitrust laws but wouldnt the u. S. Have to somehow cooperate. Well as you say opec and opec plussing including russia they might reach an agreement of some sort there is a question here about how different that would be than what you would expect producers to do anyway you know when prices fall not immediately but over time producers tend to cut because the marginal weldor less profitable its just not clear that saudi arabia in particular wants to carry the water of any kind of agreement no matter who else is involved they dont want to be alone being the. The fact. Swing producer that takes most of the weight of an agreement and they made that very clear theyve had the experience in the 1980 s. That they are not going to forget being the producer that take that loses market share in order to try to support a Higher Oil Price and that experience has stayed with them and they are determined not to repeat that mistake again. Alex do you think the u. S. This is nothing can be done here without some sort of u. S. Cooperation in whatever opec opec plus might come up with. Well i think i think the u. S. Participation is key here and i think we see it playing out in to 2 different ways number one some form of production restraint from the u. S. And you know you mentioned that the u. S. Cant really restrain production but you know the Texas Railroad commission they do have the ability to limit production out of texas they have done this a stork lee it hasnt been tested for a number of decades but we do know that you know these one of the Texas Railroad commissioners is in favor of some sort of production restraints you need to have 2 thirds of the commissioners to be on board with its actually happen and then we dont know actually how it works and and how it would actually function in 2020 but theres a store precedent for that so that that can happen. And you know its not a federal government its not like trump can order this its more a state by state decision that we made especially in texas so thats one way you can actually have production restraint and that is jeff says some of these wells are going to shut in any way at these prices so whether you have a formal sort of shutdown or not it doesnt doesnt really matter some is going to close in and some Oil Companies independent Oil Companies are very said that theyre going to have to shut unless things change thats one way to go actual production restraint and the 2nd way the u. S. Can kind of contribute here into this deal is some form of sanctions relief on russia and this is sort of sort of happening or being bubbling in the background but maybe lifting sanctions on rosneft after they sold out of their assets in venezuela you know russia is very upset about sanctions on north stream to project selling gas to europe so if there was a way the u. S. To sort of adjust and change it sanctions programs on russia that could be another way of kind of encouraging you know the big producers actually come together and do something about this do you think that could be enough to tempt the russians some sort of offer of sanctions relief. Yes i believe this is a sub sort of a scenario that can be acceptable we have seen a letter of the american but theyre all an industry to all of the not drama where there is the make another play know who their wishes and demands and are they are well basically basically if you read between do lens immobility other this is what they suggest some sanctions against one of the producers or russia if russia is the removed from or. Who trade in petroleum from supplying you know the world with its oil it would the take away about maybe 71 d 1000000 Barrels Per Day from the market and if for some Production Cuts from saudi arabia and opec members are added then yes i think the rest of oil who can recover and go somewhere or minister or 35. 00 per barrel d in a very short while and jeth everyone a producer today everyone producing country is being hurt by this but long term could riyadh in moscow be the beneficiaries of all of this we know that shale oil is what really is the problem us shale oil is the problem of both moscow and riyadh might they come out better in the end from this. Yeah its a great question and i think that thats exactly the issue the kind of calculation thats happening in riyadh and moscow to say if we could keep some short term pain with low prices something that affects us that hurts us in the short term but if that drives a large part of the u. S. Producing industry out of business then it could be worth it to us over the long term to see that competition wiped out and then prices rise over time to restore the kind of profitability that we want to see in our oil sector in russia and saudi arabia and so one can imagine a scenario like that there is alex makes a great point about the ways that the u. S. Could produce there is maybe one other way that the u. S. Could respond to what ive just mentioned here about the sort of the threat to the u. S. Oil sector is President Trump has the possibility the option to remind saudi arabia that after all saudi arabia is most important protector is the United States you know the military protection that the United States offers and so if they are willing to move somewhat on the oil market then that could rupture the relationship with the United States now thats the kind of threat one does not want to deploy very often and frankly i dont want to see him use that lightly he is already too prone to bluff and bluster so i wouldnt like to see that thrown around lightly but that has to be something that is in the back of the mind of policy makers in riyadh already do you think rushing around riyadh a hoping that they will prove the end of the Shale Oil Industry in the us old you think thats a full of the threat perhaps from donald trump. Reactively so i mean i well i mean they just points out i mean the bigger question you know the way they will market is ended up where it is in the last well id say the last you know 6 years it is because this huge so sort of over production of shale and its clear that the shale sector the break even cost for shale are much higher than what you see in russia and saudi arabia so when you see a massively kind of out of whack oil market where theres way too much supply you know the saudis and the russians think its unfair that they they would have to sort of shut in production while high cost producers can continue to pump so i mean the problem of u. S. Shale has been in the minds of people in moscow and riyadh for you know for much of the last decade or so especially in the last 5 years so i think you know the this price war is not about killing shale it never has been. But if the shale sector was brought under control as part of this i think nobody and in riyadh or moscow it would be very upset with that and fact other things especially in moscow where where us what we call u. S. Energy dominance has been used against russia in number of different places you know they they would be very happy to see the sort of power of the u. S. Shale being curbed quite a bit so. You know it is it isnt the main driver here but it certainly if it did if it did tame the u. S. Shell sector i think nobody in moscow or rio would be sad about a very quickly just a chance for you mikhail to answer that as well you think for russia to ride this out and see the end of the Shale Oil Industry in the u. S. Is that is that is an ambition a hope. Yes it is a mission with the worst the raimondi or in the Current Situation of the bridge or guard with do was do you know was that the boss or were austere your assertion and he said in an interview that one of the goals was to all of the world who can occur. To win the competition between russian oil and the us shale oil they will actually expect as a share in the story of the United States to all day or d to all its dreams as a result all the roster moves all of us are in or in the row so again we will build a great Decision Maker in the industry and so on and so forth i think this may get a mania is in will absolutely incorrect attitude and this. In the circumstances gentlemen were out of time unfortunately but thank you very much for joining us to mikhail cretien to Alec Schindler and to Jeff Cole Dan 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 forward slash a. J. Inside story you can also join the conversation on twitter our handle is at a. J. 8 inside story for me Bernard Smith and the whole team here by thought. Im counting the cost for nations seek emergency funding from the world bank and i. M. F. To battle the coronavirus pandemic argentina puts people before that crisis and from the helicopter money to universal basic income what governments must do to keep the economy alive counting the cost on aljazeera. Aljazeera. Entry. To his supporters hungarys Prime Minister is a guardian of europes borders the ramparts against migrant told. To others. 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