Series of Answers by the Eminent Scholar Ata bin Khalil Abu al-Rashtah
Amir of Hizb ut-Tahrir
To the Questions of his Facebook Page Followers (Political)
To: Abdul Aziz al-Munais
Question:
Assalamu Alaikum Wa Rahmatullahi Wa Barakatuh, our dear Amir.
May Allah grant you a mighty and supported victory and establish the Righteous Khilafah at your hands.
My question relates to the first reason (global oil markets) leading to the tension between America and Iran in the "Answer to a Question: The Reality of the Tension between America and Iran in the Region."
How can an increase in oil prices be consistent with the cost of shale oil production?
Does the increase not affect America negatively, and we have seen Trump repeatedly ordering the agents to reduce production?
Answer:
Wa Alaikum Assalam Wa Rahmatullahi Wa Barakatuh,
Regarding your question: "How can an increase in oil prices be consistent with the cost of shale oil production? Does the increase not affect America negatively, and we have seen Trump repeatedly ordering the agents to reduce production?"
We have clarified the answer in our issuance regarding this subject dated 12/07/2019, and perhaps it is now in your hands. It contains a clear answer to your question, specifically what was stated therein:
"(2- In order for coordination to become a reality on the ground, Saudi-Russian relations improved significantly after 2014. On 04/10/2017, King Salman paid a visit to Moscow, the first for a Saudi monarch to Russia. Several meetings were held between the Russian President and the Saudi Crown Prince, and Russia's interest was piqued by the possibility of directing large Saudi arms contracts towards Russian military factories. Thus, Russia and Saudi Arabia inaugurated a new era of oil relations between them, all of which occurred during the era of the US agent Salman and his son. The Saudi-Russian efforts culminated on 30/11/2016 with the signing of the first agreement to reduce oil production between OPEC and 11 other countries, led by Russia. According to this, OPEC reduced production by 1.2 million barrels per day, while the 11 other countries reduced their production by 560,000 barrels per day; Russia's share alone of this reduction was 300,000 barrels per day. Prior to this agreement, Saudi Arabia had threatened on 04/11/2016 to flood the markets with oil, which encouraged Russia to coordinate with it for fear of flooding and falling prices, thereby preventing financial distress in Russia, whose budget depends approximately 50% on energy imports (oil and gas).
3- This agreement had a positive impact on oil prices, as the price of a barrel of oil rose immediately upon signing. However, that agreement was for six months, followed by extensive discussion to extend it. Russia generally, especially since oil prices were good, wanted to increase its production to support its budget, while Saudi Arabia consistently wanted to continue reducing production as a fixed policy, even if it threatened from time to time to leave the market uncontrolled—meaning it threatened a massive increase in production. This threat was always in the face of Russia's attempts to end production cut operations. In a game that is obvious to anyone with insight, the US President would ask Saudi Arabia to increase oil production to curb prices, in order to encourage Russia to re-engage in production cut operations with Saudi Arabia. Thus, Russia appears as if it is resisting the US President's policy and fears Saudi Arabia's responsiveness to him, so Russia rushes with Saudi Arabia, albeit reluctantly, to coordinate on reducing production. As an example of this, 'Trump said on Saturday, in a tweet on Twitter, that he spoke to King Salman bin Abdulaziz and asked him to increase the Kingdom's oil production, by up to two million barrels per day, to stop its price rise, and that King Salman agreed to his request.' (Al-Araby Al-Jadeed, 01/07/2018)." End quote.
You can contemplate the full answer for more benefit, as it is sufficient... and Allah is Most Knowing and Most Wise.
Accept my greetings.
Your brother, Ata bin Khalil Abu al-Rashtah
03 Dhu al-Hijjah 1440 AH Corresponding to 04/08/2019 CE
Link to the answer from the Amir's page (may Allah protect him) on Facebook