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tv   Inside Story 2020 Ep 94  Al Jazeera  April 3, 2020 8:32pm-9:01pm +03

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people will die so i end with the advice that we all know this advice is not a request it is an instruction stay at home protect lives and then you will be doing your part turkey's president has announced new restrictions to combat the spread of coronavirus he says vehicles will be prevented from entering or leaving more than 30 cities and that's from midnight on friday a partial curfew will also be imposed on people under the age of 20 the mayor of turkey's largest city that system ball has been urging the government to impose a full lockdown and says time is running out to halt the spread of the illness. all right you're up state with headlines here on al-jazeera got a news coming up right after inside story life.
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is the oil price war between saudi arabia and russia about to end crude prices enjoyed that biggest of a $1.00 day rally after the u.s. president raised hopes of the troops will donald trump's intervention be enough and what's the impact of the rift between the oil superpowers this is inside story. hello and welcome to the program i'm bernard smith over the past month 2 of the
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world's biggest oil producers have been in dispute about how to respond to the coronavirus pandemic demand collapse stuff to add lines grounded the planes factories shut their doors on countries impose travel bans crude prices fell further when saudi arabia and russia couldn't 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 war between 2 of the world's biggest producers made and sold the biggest one day leap on record and his why i think that russia and saudi arabia at some point are very make a deal in the not too distant future because it's very bad for russia it's very bad for saudi arabia it's very bad i mean it's bad for both so i think they will make a deal a deal to cut production in response to the drop in demand from the corona virus
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outbreak collapsed last month since then the cost of crude has fallen to lows not seen for almost $2.00 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 doesn't collapse it is a balance that the united states would wish to have to have the price of oil sort out its industry not that that's 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
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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 hoffa thought. while it remains unclear what kind of truth if any might be reached what is clear is that current prices are bad she says but buyers 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 to marriage child 3 for inside story. so let's bring in our guests in moscow we have mikhail cretien
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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 he's 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 we've ended up where we are today and i'll 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 wasn't all where is the mission of the 1st of all russian you know the story which has led to the decision
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to war depart abruptly you know all of us and can i ask you jeff 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 with fairly small and so when saudi arabia pushed for a larger cut that just wasn't. in russia's economic interests and it just blocked from from doing that and so now they're seeing the consequences of getting into a price war with saudi arabia and we'll 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 didn't name names it seems like they're interested
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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 day that 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 that 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 intention here is to bring everybody back to the table to get an agreement there's a lot of talk about the saudis flooding the market that's what they're saying and
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that's what they're going to do but the real intention to get everyone back together again have an agreement that's russia and as jeff says 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 isn't it. i do not think i feel very end or pessimistic about there but there's a lot of this meeting because the rest of cannot contribute anything to that we know that for 3 years russia was just 3rd of declaring it was the grease of production in effect it was increase in it and now russia has no potential to cut down on people who want the production because of some logical problems technical problems and 'd well organisational problems of the industry while saudi arabia is the be all new large scale producer but actually can't cut production and increase
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production very quickly it is a a well for the us of all the saudis a production is actually an instrument of influence that oil prices unfortunately this list but they're still together with the potential of other opec members is not enough to look close down big gap between supply and demand amid all kind of just how to get you to explain to our viewers why russia would struggle to cut production they've got these aging oil production facilities in siberia we know about so it would damage the oil wells if it 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 that's
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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 tons deadly and to close down such a well would mean to assume 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 reserve storage box if it is slow to keep or that oil before it if there is a report finds the consumer and aleksey share in the house pessimism. yeah i mean i i think it's difficult for the russians to i mean there's technical
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issues as he's outlined but it's 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 they've got you know a number of objectives to reach they've got bills to pay and they've been balking at the you know holding a production as they've 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 it's possible that there will be some sort of deal in quotation marks but this is largely
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a political game rather than something that's going to change the fundamentals of the oil market and. what we're seeing is yes of course producers around the world are looking to react to a low of prices and where it's possible to scale down they're going to do so in that where you've got very high cost production but as mikael points out lots of conventional oil wells cannot simply be stopped you can't 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 don't expect a lot to come out of the meeting today if there is a deal the real question becomes who's 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 you've got players outside of opec
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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 he's 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 he's 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 it's sort of textbook trump here and now it leaves us all scrambling about whether there's 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
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for a solution here and i think as you pointed out you know it's in everybody's interest to find some sort of solution here it's in nobody's 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 we're going to have a meeting the sort of c.e.o.'s meeting of us all companies today all of this says you know there's 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 i'm not saying there's no substance beyond this or behind it but there are a lot there's a long way to go before we're going to get a deal here and i share my hales skepticism that next week we're going to have something else that stopped i mean we live in unprecedented times you never know but what i think we're or quite pessimistic that deal is going to happen in the
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short term is going to take some time if one is even possible and middle 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 volcano $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 this over and found and there are other 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
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oil industry there is a 1000000000 and it is supported by officials of that enters the ministry of russia that may be here 'd the funds russia has accumulated that will be enough of 'd for 18 months or 2 or year or is this is a very very pessimistic outlook and jeff all these unprecedented times that wear 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 wouldn't you need some sort of u.s. cooperation i know the u.s. can't cut production because of antitrust laws but wouldn't 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
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producers to do anyway you know when prices fall not immediately but over time as producers tend to cut because the marginal well they are less profitable it's 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 don't want to be alone being the. the facto swing producer that takes most of the weight of an agreement and they made that very clear they've 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.
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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. can't 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 hasn't 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 it's actually happen and then we don't know actually how it works and and how it actually function in 2020 but there's a store precedent for that so that that can happen. and you know it's not a federal government it's not like trump can order this it's more
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a state by state decision that we made especially in texas so that's one way you can actually have production restraint and that is jeff says some of these wells are going to shut in anyway at these prices so whether you have a formal sort of shut in or not it doesn't doesn't really matter some is going to close in and some oil companies independent oil companies are very said that they're going to have to shut unless things change that's 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 sending gas to europe so if there was a way the u.s. to sort of adjust and change its 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
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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 they're all in the spirit 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 the or one of the producers or russia euphrosyne is the removed from or. who trade in program from supplying you know the world with its oil it would the take away about maybe 71000000 barrels per day from the market and if for some production cuts from saudi arabia and opec members are
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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 react on moscow be the beneficiaries of all of this we know that shale oil is what really is the problem u.s. shale oil is the problem of both moscow and riyadh might they come out better in the end from this. yeah it's a great question and i think that that's exactly the issue the kind of calculation that's 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
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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 i've 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 that's the kind
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of threat one does not want to deploy very often and frankly i don't want to see him use that lightly he is already too prone to bluff and bluster so i wouldn't 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 this will prove the end of the shale oil industry in the u.s. so do you think that faithful 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 it's at last you know 6 years it is because this huge so sort of over production of shale and it's 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
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a massively kind of out of whack oil market where there's way too much supply you know the saudis and the russians think it's 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 i think 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 isn't the main driver here but it certainly if it did
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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 vision of the worst the raimondi or current situation of the bridge or guard with new laws deal was not because all 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 of stream as a result all the roster moves all of us are in or in the row so again we will build
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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 al-jazeera dot com and for further discussion go to our facebook page that's facebook dot com forward slash a.j. inside story you can also join the conversation on twitter our handle is at a.j. inside story for me bernard smith and the whole team here by thought.
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from the al jazeera london pool path and time keith special get income to take then the state the american state dept and state capitalism unprompted uninterrupted all of these these divisions of the working class of working people they keep us from realizing our collective power money crap at home need to make then if you obey the market for 30 years you begin to work and believe it has power over your last few years beyond the great date on al just a around on counting the cost for a nation seek emergency funding from the world bank and i.m.f. to battle the coronavirus pandemic argentina puts people before that crisis and
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from the helicopter money to universal basic income what governments must do to keep the economy alive counting the cost on al-jazeera. this is al-jazeera. this is the news hour life and coming up in the next 60 minutes. this is in my lifetime. humanity's darkest hour the international monetary fund says it will use its trillion dollar war chest to fight a global recession and way worse than the 2008 financial crisis the need these urgent.


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