Expert explains why lowering oil prices is not effective instrument of pressure on Russia
Illustrative photo: The expert explained why lowering oil prices will not be an instrument of pressure on Russia (Getty Images)
Despite statements about the possibility of lowering oil prices, this mechanism is unlikely to work against Russia. A more effective tool would be an embargo, states political analyst Oleh Saakian in a comment to the RBC-Ukraine YouTube channel.
In his opinion, the structure of the global oil market makes it difficult to lower prices sharply, even with the participation of influential players like Saudi Arabia.
He believes that an embargo, pushing Russia out of key oil markets, would be a more effective tool. This would involve replacing Russian oil and gas with alternative suppliers, such as Arab and American energy sources.
"Pushing Russia out of markets and creating a toxic image of Russian oil, so that it is purchased only at significant discounts and in small quantities, would deliver a real blow to the Russian economy," Saakian said.
A significant drop in oil prices is not expected in the near future, despite statements from some politicians about the possibility of influencing the market. The expert notes that the structure of the global oil market, including the cost of oil production in Saudi Arabia and production restrictions, does not allow for a substantial reduction in the price of crude oil.
"The price of oil may drop slightly, but to say that it will collapse — no. There are several reasons for this: from the cost of oil production in Saudi Arabia to the regulations limiting production. Arab countries need high oil prices," the expert explains.
According to him, there is another effective approach — pushing Russia out of oil markets. This can be achieved by replacing Russian oil with American and Arab oil and creating conditions under which Russian oil would only be purchased at significant discounts.
"Oil is becoming not just an energy resource but also a political one. The US can use its oil exports to achieve political goals, even if it costs more than on alternative markets. Such prices will still be accepted," he emphasizes.
US President Donald Trump called on Saudi Arabia and OPEC to lower oil prices. According to him, if prices were reduced, Russia's war against Ukraine would end quickly.
Meanwhile, Saudi Arabia’s Minister of Economy, Faisal Alibrahim, responded to questions about whether Saudi Arabia would lower oil prices by stating that Riyadh is focused on the long-term stability of the oil market.
