[What I dont understand is why very little noise from Washington about this. Obviously, oil was going down with the global lock down. But what Saudi is doing threatens more than just the U.S. oil companies. Combined with the virus, this could lead to global fighting. I have to believe the Trump admin believes this is in our best interest long term, or surely he would be tweeting about it.
My employer started major layoffs and furloughs this week.]
Ultimately, this is about the Saudis rapping the Russians on the knuckles for exceeding their production quota. Russian oil is profitable at $20. For Saudi oil, it’s $10 or less. But both countries are heavily reliant on oil revenues to fund their government spending. At $20, Putin might lose power, just like Gorbachev did. Whereas the Saudis may have a little more breathing room, thanks to recent large scale seizures of wealth from cadet branches of the Saudi royal family by MBS.
“” “” Ultimately, this is about the Saudis rapping the Russians on the knuckles for exceeding their production quota. Russian oil is profitable at $20. For Saudi oil, its $10 or less. But both countries are heavily reliant on oil revenues to fund their government spending. At $20, Putin might lose power, just like Gorbachev did. “” “”
I have no idea why do you see it as a positive outcome but on the other hand it is more like a wishful thinking.
If we are to see both SA and Russia roughly as PPP $25000 per capita economies oil would make $1900 out of these $25k for Russia but at least $13k for the Saudis.
In that sense the difference in the extraction price is meaningless.