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Media Mistakes – Russia and Oil

South Korea Economic Growth Forecast and US-China Trade Tension

Note that many news outlets incorrectly reported that Russia was ramping up oil production to take out weak players in the US shale market. But it is important to note that most countries, especially Russia, are not able to turn on and turn off oil production in a three-month period. In fact, the only two countries that can quickly increase or decrease oil flow are the US and Saudi Arabia.

The fact that Russia pumps crude oil from a very cold region that is frozen in winter – and very difficult to access – means that any attempts to adjust production could be disastrous. Shutting down a well might mean not being able to bring it back on line – so the Russians only pretend to participate in big production cuts or forced increases in flow. What Russia is good at is leading the Western press around, feeding them headlines that they believe.

“Russia increases oil production to knock out US shale producers” was one headline. More importantly, US shale producers have a lower cost than Russian mainline producers – about 2/3s of US shale producers pump crude at 30 dollars per barrel.



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