On December 23, 2014 4:19 pm
By Jim Edwards
Saudi Oil Minister Ali Naimi really got the world’s attention in an interview he gave to the energy journal Middle East Economic Survey (MEES). We told you earlier that Naimi said the Saudis don’t care how low the price of oil goes: “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
What’s interesting though is Naimi’s rationale for not caring. Basically, he told MEES, the Saudis can afford not to care about the low price of oil.
The Russians, by contrast, cannot afford it because they are inefficient producers who can’t stop pumping even if they wanted to. Low prices are decimating the Russian economy because the country is dependent on oil. That’s driving down the value of the ruble, and making it impossible for Russia to pay its debts. Already, Russia’s central bank has had to bail out one of its private banks. A full scale Russian collapse is increasingly likely. Russia can’t reduce the amount of oil it pumps (which might raise prices) because its oil fields and technology aren’t as good as the Saudis’.
The reason Saudi Arabia isn’t collapsing like Russia is because the Saudis have been careful and efficient producers, who have stockpiled huge amounts of cash in case this day would come, Naimi reckons.