MOSCOW, March 16, Nadezhda Sarapina. The President warned: the country could lose market share due to the OPEC+ deal. Trying to maintain high prices, alliance members are constantly reducing production, but others are taking advantage of this. First of all, the United States is developing shale oil projects. How Moscow can maintain market positions and income — in the material.
Oil free riders
According to the OPEC report, in January, oil exports from Russia and Central Asia decreased by 0.2% , through the Transneft system — by 4.6%. A decline was observed in all ports except Primorsk.
Supplies through the Druzhba pipeline decreased by 22% compared to January 2023. Although total exports of petroleum products increased by almost five percent over the month, over the year they decreased by about 20.
However, the oil alliance predicts an increase in demand for black gold in 2024-2025. “Mainly due to the growth of production in China and India,” explains Mikhail Khachaturyan, associate professor of the department of strategic and innovative development of the Financial University.
Leading expert of the National Energy Security Fund Igor Yushkov draws attention to the active “motorization” in these countries. In China, electric cars are becoming more and more popular, but more and more conventional ones with internal combustion engines are being sold. India has huge potential in this regard — the market will still grow for a very long time, and so will the demand for fuel.
Associate Professor of the Department of Economics at the Russian Economic University Alexander Timofeev believes that consumption will increase by 15 percent and mainly due to Africa.
However, for now OPEC+ has to produce less and less. “The goal is to earn more, but, on the other hand, this plays into the hands of countries that are not members of the alliance, including the United States,” Yushkov points out. Shale projects are expensive; their implementation requires high prices for raw materials, otherwise many will lose profitability. “It turns out that they, like free riders, are taking advantage of the efforts of OPEC+: expanding production, putting new capacities into operation. We cannot reduce production indefinitely, we need this income to replenish the budget,” explains the expert.
Find a way out
Despite the obvious risks, the OPEC+ deal brought benefits to Russia. First Deputy Minister of Energy Pavel Sorokin clarified: over eight years — 30 trillion rubles. “This is approximately two-thirds of social spending for this budget period. That is, it really gave the country very large funds,” he said at a meeting of Vladimir Putin with the winners of the “Leaders of Russia” competition.
The scheme is still in effect. Thanks to joint efforts, Brent remains above $80 per barrel. Of course, there are certain difficulties with discipline. “Periodically, individual countries produce more than their quotas. Usually this is due to the planned launch of new capacities,” says Yushkov. “When this happens, violators are forced by various tools to return to the norm. So the problem can be solved.”
Serious troubles will arise if major players—Russia or Saudi Arabia—take up such a thing. Then the entire alliance will collapse, analysts warn. Everyone will begin to extract and sell to the maximum, this will lead to an oversupply of the product throughout the world and a rapid drop in prices. Most projects will lose profitability; only the most effective will survive. According to Khachaturian, already at 40-50 dollars per barrel, an oil crisis will occur not only in the United States, but in all producing countries.
Wow
The expert believes that stimulation domestic consumption and the development of oil refining are the only way to increase oil revenues.
“It is oil products with high added value that are in high demand on the market today,” says Khachaturyan. This will take time; a significant reduction in fuel prices on the domestic market should not be expected. However, if the government takes preventative stimulus measures, fuel prices could fall by three to five percent over the year.
The necessary tools for this are available, including a damper mechanism. “Essentially, this is the difference between the prices that the state wants to see in the country and what the company could earn from exports. By changing damper payments, the authorities regulate the market,” explains Yushkov.
In practice, gasoline practically does not become cheaper . The containment mechanisms, first of all, do not allow it to rise sharply in price.
The right path is the hard one
Analysts see a solution to the problem in adjusting the OPEC+ format. “It is important to respond instantly to changes in demand. If the need for additional supplies arises on the market, the alliance does not have time to respond, and others take advantage of this. It is necessary to develop a mechanism that allows not only to reduce volumes, but also to restore them,” emphasizes Yushkov.
The domestic market requires optimization of logistics — fleet, insurance costs. While the industry is working with shadow carriers, they compensate for the risks with high tariffs. It's the same with insurers. The best thing is to build your own tankers. Including ice class for northern routes.
In addition, it is necessary to fine-tune the payment system in order to receive payment in the most convenient currency. Yushkov points to the yuan. “We buy a lot of goods from China, so we have something to spend their money on,” he explains.
It is also important to be aware of Russian oil resale schemes and structure exports in such a way as to extract maximum profit.
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