Why is oil being burned and gasoline is getting more expensive?

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Russia could start burning excess oil - it could be cheaper than shutting down fields.

And they will have to be closed because of the new conditions for the OPEC + deal. As a reminder, Russia, starting from May, is obliged to reduce production by 20% against the level of February this year.

The media report that all Russian companies will have to cut oil production in one way or another.

The Ministry of Energy decided to "divide" Russia's obligations to cut oil production proportionally between the companies - whoever extracts more will cut more.

Not everyone liked this - news agencies reported that the same Rosneft opposed this alignment.

You can understand - this company will eventually account for about 40% of the total volume of reduction (about 1 million barrels per day), since this is exactly the percentage of the total volume of Russian oil production by Rosneft.

The result of such a "bias" in favor of one company is natural, but the problem in this case is not in the market share and specific figures (although it is still significant that Lukoil, which is in second place in terms of production, should cut production by only 12%) …

The problem is that Russia may lose certain fields if it closes them down - and therefore, the talk has already begun to simply burn oil.

As the media write, citing experts and industry representatives, there is a risk that the resumption of development in the future at such fields will become impossible.

The fact is that it is logical to freeze the lowest profitable wells - where production and transportation are quite expensive, or where the fields are already quite depleted.

The assumptions that we made in the title of this article also appeared.

So Reuters, citing a representative of one of the oil companies, reports that in some cases it will be more profitable to extract and burn oil.

Of course, temporarily - until the terms of the OPEC + deal are revised. So far, the agreement implies a reduction in oil production over the next two months, May and June.

It is clear that all these subtleties are the lot of specialists. At the moment there is no clear data on how much oil will burn and how much money in this situation.

But all this is happening against the background of other "market features" - and in the end it looks really strange.

After all, oil and fuel prices all over the world have fallen - but in Russia retail fuel prices remain almost unchanged due to the specifics of market regulation.

We have already written about the so-called damper and about the fact that Russian oilmen started selling gasoline "at a minus" even on the domestic wholesale market. But at the same time, the price tags at gas stations do not fundamentally change - judging by the comments of users to the article mentioned above, in many places gasoline even rises in price.

Now the situation is starting to look even more absurd: oil in the country will be burned, fields will be closed and lost forever, but fuel prices for Russian citizens and Russian business will remain at the same high level.

Of course, in response to such surprise, you can hear that the author mixed everything together. But I would like to bring one comment of an ordinary user - to the same article.