Although stockpiles cannot make up for a permanent loss in Russian output, they could make a big difference for a few months, until the crisis cools down or alternative sources of supply kick in
, secretary-general of the Organisation of the Petroleum Exporting Countries , reflected upon the dramatic geopolitical developments of the past few weeks as he addressed a ballroom in Houston this week. Thousands of oil executives have gathered in the world’s petroleum capital for CERAWeek, an energy conference organised annually bycartel has seen seven painful boom-and-bust cycles in oil since its founding in 1960, and worried that the Russian crisis may lead to another such “catastrophe”.
Russia used to be seen as a trusted partner. Now, Mr Yergin says, it is seen “not just as unreliable but undesirable as well”. If Russian oil becomes untouchable, oil executives speculated nervously over coffee and cocktails, crude could hit $200 a barrel this year. They were nervous because, setting aside all the on-stage posturing, many oil bosses privately worry that the Russian crisis may sound their industry’s death knell. The’s new strategy is already doubling down on greener alternatives.
That might change if America rallies the world around a global embargo. However, such an outcome seems unlikely. Theis reticent, at least in the short run. China and India, which hate American sanctions and who refuse to condemn Russia’s invasion, will not join. Kenneth Medlock of Rice University points to a recent gas deal between Russia and China to be settled in euros rather than dollars as a sign that the two can work around American sanctions.
If not the Arab sheikhs, what about American shalemen? Frackers can bring oil to market much faster than fellow drillers in the oil sands or offshore. After a collapse a few years ago, American shale output is expected to grow this year by perhaps 750,000 bpd. But even ramping up production further would not be enough to offset lost Russian crude. Scott Sheffield, boss of Pioneer Natural Resources, an American oil firm with big shale holdings, says the industry could increase output by 1.
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