It is said that oil runs the world because without oil, the major machines of industry would cease to operate. However, what happens if the machine themselves are operating? What good is any commodity without a use that it can be applied to? This is something that the world is finding out as CNBC reports that oil prices may go negative- i.e. it will cost more to produce oil than sell it because it will be so cheap, and this will have a major impact on oil producing nations.
“Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products,” Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week.
He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market.
“For land-based or land-locked oil producers, this means only one thing,” Schieldrop continued. “The local oil price or well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production.” (source)
Note the highlighted part. This will affect landlocked or largely land-based oil transporters.
What is the biggest oil producer in the world, and who also happens to be land-based?
For those who have read and are familiar with my articles, I have written extensively about Russia and her resources, and that her economy is non-existent save for the manufacture of cheap military goods for third-world dictators and the export of raw materials, the largest of which is oil. If it were not for oil, Russia would have collapsed a long time ago, and most of her income is derived from oil.
High oil prices are a great thing for Russia, and low is bad, because low prices means she cannot earn money. This is part of the reason for the US suppression of oil prices- it is not about Saudi Arabia, but about waging economic war against the Russians.
The COVID-19 coronavirus is the ‘gift that keeps on giving’, as it has enabled governmed an excuse to engage in all kinds of foolish behavior. One of these behaviors is to further dramatically plans for war against each other. The cessation of the US and world economic machine will hurt Americans and impoverish people, but it will have devastating effects on other nations, especially Russia. If she cannot get her oil from the various points in Siberia or the Volga basin (which are her main reserves) in a reasonably profitable manner, she cannot survive economically, and while Putin and his friends are very rich, most of Russia is suffering badly and on the edge of collapse.
The US economy will collapse likely too, but this is intended. It will allow, after a brief period of chaos, the US to revive a new dollar, revive manufacturing, blame the problems on the Chinese, have an excuse to go to war, and attempt to reposition the dollar as the world’s reserve currency again. Russia is not as likely to come out so lucky in the even of any collapse, for given the strains of nationalism in her and the current problems, there is a strong chance that she could break up into a series of multiple states, with what is today “Russia” returning to her historical boundaries pre-16th century of being a nation largely isolated to the plains areas west of the Urals. This is the “decline of Russia” project promoted by the Jamestown Institute, and if it was to happen, would bring about a flood of American and European investment into the region.
This is not to say this one event would cause a collapse. Rather, it would be a series of events, and what is happening now is simply a further attempt to weaken Russia as part of a larger plan in the steps toward global conflict.