this is a time for the west to replace the best option for the ukraine rush of war and what, what those options look like. what is us strategy when it comes to iran for almost 200 years, americans have generally been stuck with 2 political choices. but cannot ever change, because it comes with cook us politics developed a lot of latin america for most of my career, but no countries alike. and its my job to shed light on how and why oil prices have a 9 month high off the saudi arabia and russia say production cost also continues is not good news for consumers, older whitehouse. so what's behind this move? money politics list is inside story. the

other that and welcome to the program. i'm laura kyle. the price of oil affects nearly everyone in terms of living costs and how much we pay for things like food and basic goods. that's why that decision by saudi arabia and russia to keep in place oil production and export costs as being felt globally with prices of the commodity rising worldwide. both nations have that and domestic reasons for bad decisions. some speculate them to the decline and relations between saudi arabia and the united states may be driving new alliances between the saudis, russia, and china. but how much is your politics? were any influence a must go on? we ads oil policy, or is it simply economics and hot news business seeking to make more money? we'll be asking all guest and saudi arabia russia on the us and just a moment about that and more but fast. this report from saw highlights on white oil

prices a staying hi, a salad you raise your rusher, announced that extends costs in oil production until the end of the year, flushing it by 1300000 barrels a day. fuel oil supplies mean higher prices, and that's bad news for consumers, businesses and governments looking to keep prices down. the russian saudi decision on costs follows and moves by the oil produces blog opec plus the cost supply in april. and then again in june, the impact to the saudi russian decision has already been felt with the price of brent crude rising to more than $90.00 a barrel for the 1st time this year. that's an increase of more than 25 percent since june when the price stood at $72.00. both value ravia and russia once higher, prices for domestic reasons. the international monetary funds says the saudi kingdom needs and all price of more than $80.00 a barrel to balance it's budgets. reality also needs to fund it's. i'm vicious

vision. 2030 projects to transform is economy and diversify away from its reliance on oil revenue. and russia, well, it's more money to fund it's more in ukraine and help cope with severe sanctions imposed by west nations. a higher oil price isn't welcome political news in the white house. so while the us benefits, as well as big as all producing nation, when prices go up, businesses and consumers sofa and that's of course includes american votes is just the year before presidential election. john is economy and the risk of a downturn is a worry to or produces as a huge consumer of oil. any reduction in demands because of an economic slowdown would push oil prices low globally. and that's likely to keep brochure inside your rape. you're on the same track, at least now in costume production and keeping price is higher. the sort of height of the inside story. the. well,

let's bring in all guess now and in we add cornelia my see, the consultant see my resources in moscow. chris waif, chief executive officer, to teach a business from macro advisory. and in houston, texas. i'm julie powell and president of the powell oil associates. that's a company that specializes in oil trade. a very welcome to all of you and your to start with you has this other bounce meant this limit of the amount of oil available on the market to the end of the year. come as a surprise, i think it was a surprise to the market that the cuts were extended to the end of the year, where the market expected to go month by maya. and as a result, as well, the inventory is continued to decline. we're saying well, price is riley, especially in the face of the increasing demands. and so tony, you will, in saudi,

i know that you know, the saudi oil minister, perhaps you can shed some light for us on why the saudis are extending these costs . well, i cannot speak to any minister so, so the tests up front. but if i look at the decision, i've never also looked at the most recent opec decisions. this is not, this is less poly picks, opec doesn't really do that much politics. it's also a reflection of the rory of the global economy. we have seen china, i'm not really getting out of the old ones from the, from the 0 cobit policy. so that's, you know, we, china is a bit of a sick man. you're a, has a war going on and you look especially at germany, which is not doing well at all. so there is a real concern where the global economies headed. yes, it's 2 at the same time we have um, god global of consumption. an old time fire behind the 3000000 barrels

a day. but still it's all seem as quite 10 years. so i think it's also a matter of being from a no tech perspective. it's also a matter of being crude and, and being ready to, to, to before. what happens if the economy really doesn't do too well. you can always, it's always easier to put the tap on the to then to that, to close it under. do you accept that prudent, see, i mean, the saudis have said that they are willing to review it month by month on ton increase production co, uh, production if necessary. well, i do agree because we've seen over the last year, saudi arabia has taken proactive and preemptive stats, in order to, in their words, produced oil market stability. and they may be having great insight into the demand in china due to their joint venture refineries in c, a demand from a purchasers in that country. and as a result, they don't want to see

a repeat of what we have seen in the past where the world. busy is it's where recession, oil demand plummets, as well as the price, while the salaries are worried about their domestic spending. of course, those bring you in because russia does appear to be standing firm with styles the on this limits thing. it's exports of oil onto the mock and what does it get out of it? but it's for the rest of it is a case of powered nose economics on a short term and the longer term perspective. obviously the short term, the short, comedian term perspective is that russian needs the money to fund the budget to which is not, of course, funding the ministry as well as the domestics, social stability. so it obviously wants to earn as much money as, as, as possible over the medium term and the actions of opec, particularly the actions of saudi arabia have helped russia kind of a boost. it's income if you're, if you go back to the air year this year,

when the oil price was a bit soft rush, it was having to sell it's buying heavily discount. it's uh, you know, 3040 percent discount on the, on the brand price. uh, what it was, what it was using to gain markets in india and china. but since saturday, in particular, has announced these big cuts and then the extended them and rushes participation to a smaller extent, $300000.00 barrels a day to the end of the year. but it is allowed russia to boost its oil, the oil price that it gets for exports. so now we heard from the ministry of finance just recently that russia is earning an average of $75.00 per barrel, whereas it was down to as low as 40 area in the year. that means that budget is now recovering and financially the russian is now kind of in a much safer place and it was the term. and i think this up see a here just

a lot and travels in the middle east and all that countries as well, longer term it all of this is against the backdrop where, where the constant message from the west and protect or is that they are moving as fast as possible away from hydrocarbons towards renewable and others. so. busy so, so essentially the message to the oil producers from the big way kind of western markets is that there is a time limit on when how much longer we will want your. busy oil or gas and we willing to pay for it. so producers not also need to earn a lot of money oversight, genetics, 10 years to use that money to create you economic drivers for the longer term. so i think there's kind of both shorts and mediums have factors when it comes to this conclusion to can throw the price up towards a $100.00 branch coordinator. is that the situation that you'll find in the, in saudi that produces a pain to keep the price high for as long as possible seeing it as a finite results? well, 1st of all, i mean when you see, oh, pick actions. oh, pick items up is always very clear. we're not that they're not dealing with pro,

with a price person or they're dealing with keeping the market adequately supplied. and i think, but i think that is something in that that you know, the, the always we did congress that we want to move away from oil and the, we want to have in trouble combustion engines on the streets out by 2035 and all those things, but the line new in the emerging world in africa. and so those are where we'll have, where we will have 2000000000 people more. by the end of 2050. we will have, they will still need oil, you know, we need and that she, we need all sorts of software and that she, so it's not just about getting oil out. it's about getting c o 2 out there. you also have carbon removal technology. so we need to have a broader view point, but there is certainly something in a lot of what, what i will call interested, and that's in saudi arabia. i mean,

they have good shoot projects going on. you've got vision 1st, you've got this whole 15 nails being built in that as it some things go to funds that yes, something's going to follow that. but there's also in question from, from investment um, from, from invest problems from abroad. so something's got a fund that, but it's less about funding documents that those projects will be found that the, the, the, the solid, the sound. but it's also it's, it's really when we, when we talk about or yes, obviously anybody would like. but the key input to bottom spot to which in the case of saudi is oil to be as high as possible. that's true, but i don't think this is about funding. i don't really think this is about funding vision 2030. this is really about domino keeping the markets after the adequate the supplies. i'm thinking ahead of what, what the downside into economy can be. because as i said, the saudi,

something very capable of putting up the putting all the on the tack because they have the, they have the, you know, they have a huge production capacity. so, you know, they off 1000000 barrels a day, more in there that they can put on them if they choose to do so under a do you agree with that? do you agree that solve the saudis moves and not so much about the money more about supporting the stability and the balance of oil markets to see us see it that way? well, i don't think the u. s. c. is it that way? in fact, i think that the saudis are quite concerned about the revenues. and in fact we see that okay, with their monthly demand forecasts or actually the most optimistic on increasing demand. more than the international energy agency forecasts of $2200000.00 barrels a day of growth this year. so we see that old pack, well, quite optimistic on the demand side is,

is more than happy to reduce the supply as to the market. what i would say is saudi arabia is really shouldering the burden of the supply cuts at the same time that we see increased production from a ron libya and ben as well as who are not bound by the opec plus quotas. what impact though, does it have on the economy? because the solid, the output is such a huge percentage of the global oil markets. i shouldn't imagine it's buffer too much by the, of a, of the oil producing countries that you just mentioned. so what impact of bees these cuts from saudi and russia have, or from saudi particularly cost on the us economy? well, certainly the consumer is paying more for gasoline and that of course, is a highlight for the buying it ministration. but a more serious issue is that the price of the diesel is rising and dramatically. and that's a hidden tax on the consumer for all the goods and services that they're purchasing,

whether it's at the store and what for home. busy delivery, and that not only affects us here in the united states, but elsewhere in europe, where they're more dependent on diesel and diesel prices as well as the rest of the world. chris, do you think that the saudis are lining themselves more with russia and against the u. s. on this particular issue? is it a message to the us? well, no, i wouldn't read it as a n t us move by, but by say, saturday but, but for sure there we can see greater kind of political and also investment and trade engagement between saturday and, and russia. but also the saturdays are and other everetts at other countries because since the entrance and guitar are also much more active in terms of developing trade and investment, kind of a looking east and looking north. so we see significant investments in, in central asia from, from countries and in the gulf of cmc engagements, with the,

with the, with china and with india a. so it is part of that diverse vacation. i would not read it as a nancy us move it for sure. that's kind of what used to be a very close political relationship between saturday in washington is now gone. but it's gone because saturday is diversifying and is looking to, you know, could see broaden this relationship in this trade. rather than say, we're turning against the west and we're going to east, i think i see it more as diverse vacation. i don't see no saudi along with the everett's will, and the ran will join the bricks, the grouping from january. we've yet to see how does this develop? how does breaks, you know, to develop it beyond why this has been just, just been a talking shock, but now to get figure with saturday, the average. and also even last week, just one final points. we heard the 1st ever cargo rails, our train between russia and saudi arabia, a kind of left russia and will arrive in saudi arabia kind of in the next couple of

days. this is the 1st ever direct kind of trade route between russia and saturday, and the, and it will, of course, go true. it ran in central asia. but the, the intention from both sides, when the, when the train left russia was that this is going to become a much bigger trade routes and just put future between the 2 countries. but much more robust investigation as i would see it rather than away from the west towards the east. but most go surely would be very happy to jump on board with this policy if it was seen to be hosting the us to be hosting job item. yeah, even though it wouldn't be too much into that kind of and she kind of us the stance in moscow for sure. we were all aware of the politics in nature and then must close view of that. but now when, when you talk to ministers and you talk to other, other officials it's, it's, this is not about, you know, less hurt to us and lets you know, grab side of the out of the western camp and bring it in to, you know, kind of the did the rest of the china cab. now you don't hear that. this is really

the dialogue is all about. how can we create new markets, new trade partnerships, new co investments. and clearly that means bringing in, not just india and some african nations, but also the gulf, the rich gulf states as well. and this must conceive that there is a lot of kind of commonality in the long term interests of countries like so the, the average that under i should because they are all currently very dependent on hydrocarbons. they are all looking at the long term future of diversification. understood must, cuz position is that therefore a bit there. it makes sense for our conference to cooperate, but not in the i don't not hear anybody saying this is an n t your n t west move. it's more about how can we work together? it's kind of decrease a better trade and investment partnership. long term, it's not political as far as like okay, okay, let's bring onto it on that side and say if he agrees under is the feelings but sentiment that in the us, that this is not political,

that they shouldn't read anything into it. it's surely economics. well, i do think from the savvy perspective at quite a bit of it is economic and clearly the u. s. has already producing nearly 13000000 barrels a day of crude oil and export and 1000000 barrels a day, a bad. so we really have the less dependence on saudi arabia in the middle east for our wells supplies. in addition to the united states continues to increase its l. n, g at sports. where i do see a lot of politics is that europe is really the worst thing itself from russian energy supplies. the u. s. is coming in to build some of that gap. and then the us is looking at producers in the middle east to build the rest of that gap that's made by the shortfall of russian oil sales into europe. but how concerned should buys and be as the election? yeah, the approaches pretty rapidly and prices petro palm,

they're approaching $4.00 a gallon on land. that is a politically sensitive threshold. solely what combining do at this stage to keep the price is as low as possible. well, there's very little that 5 and you can do in the short term. we just saw they cancel the set and remaining leases, and i'll be alaska, national wildlife for serve. so that is disheartening to the oil industry. he well, industry needs of much more sir. t for the long term planning of drilling to produce more well here in the united states. but while you have seen the by mid ministration, do is started coughing to that as well. and a rod, i think with the name of getting more well production to the market, which tempers and increases in well price is clearly a ron is just announced that they're producing well over $3000000.00 barrels a day of well then we're seeing once again the us talk to them as well about having free and fair elections in the way they already leave the sanctions on that country

. code is a real tight right business, but saudis will king if the oil price gets too high, inflation increases that full banks have to bring up interest rates and then the economies slaves and the, the demand drops back down. they'll be having to keep a very close eye on the impact. so these price hikes have, i think, yes they do. one does have to have a quite a type thing, and it's especially, you know, the cpr, it's not the corner flash, it's a cpi that is going to go off of that to boris. obviously, i'm sorry to back governors around the, around the world. so there's a, there's a typo because due to global economy means mazda mazda, full oil. i'm not who got a global economy is less demand for, you know, if you look at it from the standpoint of the mid least, an oil producers, the real, the biggest customers are india and china. so it does for a long time. if the, the, the, the trade flows,

the oil flows have walk on east and they have gone west now with the russian, with the russian sanctions. more of it goes to europe again. but that's, that's another, that's another part. but you always will try to be close. you always will try to board fuel market closely. and that's why, again, where we come into looking at what to try nice doing is with a chinese economy is going because if you are largest client, if you don't know where that is going economically, you're going to be prudent. chris, where is the chinese economy going? is it recovering or is it still stuck? nice thing it's, it's stagnating. and in fact that i think what are the reasons, perhaps why? by side of the, in the rush, i have a, you know, it may just statements to of the cuts extended to your end rather than month by month to as, as was mentioned was previously is because there was a raised concerns that the chinese could have some significant economic problems uh by the end of this year or in the next year. and specifically that's related to the

real estate market. the amount of lending and the real estate market to potentially the amount of, of bad loans. and then defaults in, in, in the real estate market. it's something that the government has turned a blind eye to as a language to develop. and you can see all the signs of a realistic bubble in china. and if it's not handled properly, then you could have a major problem of the chinese economy next year. and i think that's also a proxy. there apps, why, why or russia are taking this long in terms of the terms of cut because you cannot at. busy be sure to dig chinese economy will either remain stable or, or girl it there. there's a real danger of a crisis in the chinese economy because of real estate. one party lost a quick point to the if i make the bit to the actions by a saudi by opec. i've actually of course, we can to large extent the, the impact of sanctions a on russia and around because now you have

a situation where as i mentioned, russia is now selling. it's only for an average of $75.00 per barrel. according to the finance ministry, whereas the price captain paused by g g $7.00, an e u was $60.00, but the e u a g 7 have have delays. any review a bit of the price cap, which has been called for by some countries because they do because they need the oil and they need the oil in the market and they're not going to do anything that would further type in deal in market and drive prices higher and as our colleagues in houston mentions the, the rates are now very openly talking about a boosting production. and what we're 3000000 of the heart target of 3800000. we buy within 6 months, and that means their exports are also rising. and everybody knows that, but again, it's not causing any that there's no complaints from washington, etc, because of what saturday has an opec has done, means that the market needs but russian underwriting oil. and that's,

that's true is uh, do we haven't seen any big outcry from washington is the best move because it's right, hard to balance to politics and economics. well, i think that's exactly right. the administration wants to see lower gasoline and diesel prices and therefore not going to be producing that much more crude oil here in the united states. you can simply sanction everybody and expect that the oil supply goes down and prices remain stable. and as a result, we've taken this, you know, lovely other way, philosophy on what's happening with the right. now we're seeing the same thing happened as the rushing well, the sales exceed the price cash. not much action has been taken against the bethel owners or financing of those cargoes because the administration knows they don't want to supply disruption, as we potentially experience when russia had invaded the ukraine. that didn't 2022

cornelia just to, to, to look at the rule to pick to as we wrap up the show do high oil prices risk a global economic recovery? well, hi. all the prices will have an impact on, on the, on the cpi, on the, on the, on the, on the headline inflation rate. and that will obviously then have an impact, a central banks, mandates is to keep inflation of 2 percent. will have an impact on interest rates, which then we'll have an impact into impact on, you know, how quickly economies can grow. so in that sense, yes, they do have, but they don't have an impact on that. is strict on the, on the radar screen, both saudi arabia, but also of, of, of opec. so as you said earlier, it's tied through, you know, how much does one have to do in order to be and if there should, should there be a refreshment china? and the how much, or this one has to be nice,

not to have too much of an inflationary impact on the global economy. so yes, it, it does have, it does have an impact. but as i said before, you know, the, the, the, the spare capacity is there only the small oil shouldn't be required, but the kids, but saudis and tall adjustment as well. so i don't think you need to have unanimous decisions to move anywhere. but so do you certainly the big brother, i'm solid. you and ross size the big brother for the no, no pick a group and this opec gloves some arrangement. but the saudi certainly saudi is the, is the largest crewed export to the us by the way is the largest them crude producer. but them, so the is the largest crude export the so yes, certainly if you had the issue at the 300 the phone pound, gorilla in the, in the, in a room of smaller con,

please. of course you will have to fix it. and under just last, what to hear, that does the end of the success of bite and all mix of job items. economic policy depend largely on saudi as well. it does to the extent that $59.00 makes the hands on a affordable energy prices. and what the market is concerned about is that if it sees that world, inventories are declining, the market may go up faster, then saudi arabia is willing to open up the tabs and you can have a mismatch and timing. that of course, creates a political discussion over here about higher price is, is definitely price is we add very quickly to increases include well, prices at the consumer level of such an interesting discussion that we've had here today on inside story. many thanks to all guess with joining us coline, i'm a chris waste and andrew lip. how?

i'm thank you to for watching. you can see the program again any time by visiting a website that's out. is there a dot com? i'm just on discussion to visual facebook page. that's facebook dot com forward slash 8 inside story. you can also join the conversation on x, formerly known as twista, a homeless at a j inside story. from me laura kyle, i'm the whole team here. as i sent out the the

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