Tuesday, 16 January 2018 00:11

Will Saudi/Russian Energy Alliance Benefit Global Oil/Natural Gas Growth/Prices?

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What historian would ever have forecast the unique forthcoming energy understanding between historically bitter enemies, Saudi Arabia and the post-Soviet Russia.

An international “friendship photo,” featuring Saudi Arabia’s King Salman and Russia’s President Vladimir Putin tells the story graphically, taken in the sumptuous headquarters of the Russian leader. While these once bitter enemies on the world’s religio/political stage would never even talk to each other until most recently, the Saudi OPEC combine realized that it could not maintain its long term benefits; even in a fast-growing global demand market, without the “cooperation” of Russian/U.S. energy pricing, as world demand continues its accelerating growth path.

Since Russia had tentatively agreed to partially cooperate in price arrangements, with OPEC’s leader, a more compatible arrangement between these two former enemies had to be solidified. But just as this arrangement has reached its initial stages, here comes the U.S. on the doorstep of becoming a major international producer of oil, natural gas, as well as its derivatives.

While there have been no arrangements as yet, the Russo/Saudi Arabia cleavage and its attendant Russia animosity, had to be cleared before a more compliant U.S.A. could be brought into a global understanding, regarding international price structures, rather than inviting price wars.

This turn of events has been made possible as President Donald J. Trump has indicated reducing Environmental Protection Agency restrictions, and pressuring done by the “Obama/Iranian” door closer which was bringing that major oil producer back into the game, big time.

Also helpful to a major U.S./Russo/Saudi energy opportunity expansion is the restrictive energy Paris “climatological purity” drawdown to kill off energy expansion.

While oil and natural gas exports from the U.S. will likely become major factors in the years ahead, the motivation of “common interests” will likely mitigate any potential “price wars.” This would surely be developing without such a “three-way” oil and natural gas peace treaty, sure to be forthcoming in the decade ahead.

In the history of major global agreements, whatever commodities and countries have been involved, such universal global understandings have always done much better for each other in a “friendly atmosphere.”

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Morrie Beschloss

Morris R. Beschloss is a global economic analyst, award-winning long-term top business executive, and avid blogger.

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