A crisis often brings out the best in people. Sadly, however, there are also bad actors who try to take advantage.
That is certainly true of Russian President Vladimir Putin and the Crown Prince of Saudi Arabia, Mohammed bin Salman, who have used the COVID-19 pandemic to wage economic war against other energy-producing countries – especially ours.
When the world economy started shutting down in response to COVID-19, Russia and Saudi Arabia set in motion a plan to crash global energy markets by ramping up their oil production.
Dumping oil into a global economy on the brink of recession makes no economic sense unless you are trying to kill off rival U.S. producers that have less liquidity. Russia and Saudi Arabia are clearly sacrificing short-term profits for long-term profits.
These actions have caused oil prices to plummet, with the key U.S. benchmark for oil hovering around $20 per barrel at the end of March, down from an average of $64 in 2019.
But geopolitically speaking, this is a highly calculated move. Dumping oil into an oversupplied world market will allow Russia and Saudi Arabia, which leads the OPEC oil cartel, to crush rival energy producers and steal their market share over the long haul.
For America, this means a deeper recession due to mass layoffs and bankruptcies in the energy sector that could have been prevented. In Colorado, we have already seen one major oil and gas producer file for bankruptcy in the wake of Russia and OPEC’s price war. Layoffs, furloughs, reduced hours and pay cuts have started at other major energy firms in our state.
If this price war continues unabated, we are looking at a collapse of the state’s energy sector, which will weaken demand for businesses across the economy and deprive schools, cities, counties and the state government of critical tax revenues. Climbing out of the COVID-19 recession will be hard enough in Colorado, but Russia and OPEC are making it harder.
Their price war also threatens our nation’s newfound energy security and geopolitical strength. Make no mistake: A momentary reduction in gasoline prices is not worth the cost of giving Russia and Saudi Arabia control over the global energy market and making our economy dependent on foreign sources of energy once again.
The nation’s No. 1 priority, of course, must remain winning the war against COVID-19 and overcoming the economic shockwave it has caused. But Russia and OPEC’s price war is making the shockwave worse, fueled by a belief that other economies – especially ours – will suffer much greater damage than theirs.
As a country, we face a choice: Surrender to this thuggery from Russia and OPEC or stand up for ourselves.
I believe the defense of our economy against the impact of the COVID-19 current crisis must be broadened to include American energy firms and their workers.
Yes, it’s true that Russia and OPEC officials have agreed to talks, at the urging of President Trump, to end this price war. But what if those talks fail or the parties violate any agreement that is reached? America must be ready to act.
First, we need to get our allies on board with our intentions to push back against this aggression. Then President Trump should order two key actions.
He needs to outline tougher sanctions and other diplomatic and financial moves against Russia that will impose maximum economic pain. And he needs to raise the pressure on Saudi Arabia. OPEC and U.S. oil producers have been at odds in the past and the Saudis must be reminded that America will hold them responsible if the price war continues.
These are just the initial steps in a much broader discussion about defending the American economy, and our leadership role in the world. But I am confident President Trump will attract immediate bipartisan praise and support for taking them.
This is not about protectionism. American energy producers have dealt with unfair competition in the global market before – and thrived. But when rival nations seize on a global health emergency to cripple the U.S. energy sector, that’s a radical escalation.
Too many working families and businesses around the nation depend on domestic energy production to allow this foreign aggression to succeed. Nor can we afford to lose our energy independence, toward which we have been striving for decades.
Russia and OPEC may have started this price war, but the American president must finish it. The time for action is now.
John Harpole is president of Littleton-based Mercator Energy, www.MercatorEnergy.com