Although the current crisis in the oil market is associated with many factors, the most significant of them is the spread of COVID-19 and related quarantine measures, said Pavel Sorokin, Deputy Energy Minister of Russia, at an expert discussion, held online by the Valdai Discussion Club on March 27. He said the effect of the coronavirus was “stunning”, because about 60% of oil consumption is used for mobility – ships, planes, personal cars – and since people around the world have sharply reduced the use of transport and commercial transportation, the market has to pay a hefty price for it.
At the same time, the Deputy Minister emphasized that Russia favours the passage of this difficult period in a mode of stability and intends to be guided exclusively by common sense and the economy.
Konstantin Simonov, General Director of the National Energy Security Fund, Vice-Rector of the Financial University under the Government of the Russian Federation, pointed to the political aspect of the crisis – namely, the failure of the OPEC+ agreement due to contradictions between Russia and Saudi Arabia. The terms like “price war” or “oil war” are not inconsistent with reality,” he said. “Saudi Arabia made us an offer that we could not agree to. They needed a reason, after which they went to certain actions – increased production, used reserves. In two or three days this situation will not be resolved – this is a war of survival, a war of nerves.”
The expert also noted that the Russian Ministry of Energy should promote the Russian position on the issue more clearly in order to prevent panic and the spread of incorrect information.
Marc-Antoine Eyl-Mazegga, director of the IFRI Energy Center, suggested that no one wins in the current situation, and we are talking about who will lose the most – although Russia is losing less than others. Therefore, the leading oil producers should show responsibility to other players.
Two other speakers – Abbas Maleki, Associate Professor, Department of Energy Policy, Sharif University of Technology in Tehran and Omar Al-Ubaydli, Director of Research at the Bahrain Center for Strategic, International, and Energy Studies (Derasat), examined the crisis from the perspectives of Iran and Bahrain.
Ultimately, the experts came to the disappointing conclusion that until the end of the coronavirus pandemic – or, at least as long as quarantine measures continue – the situation in the global economy will not change, and one needs to be ready for this.