Oil has entered our lives so much that we sometimes don’t realize its significance: without oil, world agriculture will collapse, without oil it is impossible to deliver food products to cities with population over one million people, and without oil, military equipment turns into simple iron. It can be said that oil saturated with energy has accustomed mankind to an “easy life”. Today, oil is the most popular commodity and source of well-being in many countries, including Russia.
In recent decades, world oil production is practically not growing. There are several reasons for this: the increase in open oil reserves lags behind the rate of its production; importing countries are pursuing energy conservation policies and are also increasing the use of greener natural gas. The entry of new players into the global commodity market in the mid-twentieth century contributed to overflowing the market and lowering oil prices. In order to protect prices, oil-exporting countries created their organization OPEC in 1960. In 1973, OPEC launched the “oil weapon”, significantly reducing production. Then, Saudi Arabia completely stopped the supply of oil to the United States, after which there was a fourfold increase in the price of a barrel. The embargo caused by the consequences for a long time embraced the entire social structure of industrialized countries.
Today we are witnessing an almost similar picture: the economic crisis caused by the same oil weapons, exacerbated by an overabundance of production and a decrease in global demand for raw materials due to the coronavirus pandemic. It is hard to say what the Russian negotiators with the Arab ministers were guided by in early March in Vienna when they refused to reduce oil production and thereby maintain prices at $ 50 per barrel. If Russia accepted the conditions of the OPEC + countries and reduced production by 400 thousand barrels per day, then by the end of this year it would have lost only $ 7 billion. The decision of the Russian oil diplomacy “not to reduce” caused an instant twofold drop in oil prices.
As a result, this year alone, Russian oil exports are missing $ 35 billion. It turned out according to a proverb: “went for wool, and returned shorn.” At present, the Russian oil industry, to the best of its ability, is increasing production, intensively depleting the bowels and, one might say, for free supply oil to the West. Many unfriendly countries where we pump Urals crude oil thank us for this generous gift.
According to the Energy Strategy, by 2030 Russia will produce 540 million tons of oil per year. Of these, only half is supposed to be refined, and the second half in the form of crude oil is to be exported. It turns out that our country, even in the future, is not going to change the structure of the commodity economy. For many years we have been hearing the mantra: “Russia must jump off the raw material needle.” Indeed, selling crude oil in quantities of more than 200 million tons per year is wasteful and stupid. 140 years ago, the founder of Russian oil refining, Viktor Ragozin, said: “Exporting oil outside the country is tantamount to deliberate ruin of the country, taking away earnings from the Russian people.
Unfortunately, Russian exports of raw materials are growing year by year: crude oil, natural gas, round timber, aluminum and nickel in pigs, rough diamonds. At the same time, the proceeds of capital, as a rule, flow into Western banks. Russia has become a global supplier of raw materials and financial capital. Such squandering does not color us when the wealth of the Russian subsoil is not used in the homeland.
And yet, we can jump off the raw material needle without putting Russia’s interests under attack. It seems that we do not need to extract oil more than 500 million tons / year, and gas – more than 600 billion tons / year. It makes more sense to quote production, as the Arabian monarchies do. Indeed, why are we rapidly draining our bowels in order to quench the hydrocarbon appetites of the West? It is much more reasonable not to drown banknotes, but to accelerate the development of the petrochemical industry. Deep oil refining is the smartest strategy! Oil during complex processing gives rise to a whole class of products, the profit from which is several times higher than the cost of oil itself. For example, an export batch of high-value products derived from 4 million tons of oil allows us to gain the same amount of currency as in the export of 24 million tons of crude oil.
The license for the right to use subsoil should contain a clause obliging to process the bulk of the oil produced into synthetic fibers, rubber, mineral fertilizers, and plastic. The mining license must explicitly indicate the predominant use of domestic technology. This will revive our mechanical engineering, otherwise we have reached the point that we are buying drilling rigs in China. The photographs taken at night from the satellite show how Western Siberia is lit by flaming torches of associated petroleum gas, which is burned up to 20 billion cubic meters per year. This is a direct economic and environmental damage! It is here that investments should be sent as a matter of priority.
Such an approach will create not only millions of necessary jobs, but also radically improve the environmental situation. According to the Ministry of Natural Resources, in Russia there is not a single mining company, in the fields of which everything has been done in accordance with environmental legislation. The Ob River annually brings to the Kara Sea up to half a million tons of oil products. For every 5 km of the production pipeline route, there is one accidental leak per year, because companies do not update dilapidated pipes on time. In a typical field, the oil content reaches two tons per hectare. In Western Siberia, there are more than 5 thousand illiquid sludge pits. At the same time, the profits of companies are privatized, and the entire Russian society and Russian nature suffer damage from pollution. I recall Indian wisdom: nature is not what we received from our ancestors, but what we borrow from our descendants.
As a positive example, I will mention the launch by the Rosneft oil company in Tuapse of Europe’s largest oil refinery, as well as the launch by Tatneft of the modern Taneco petrochemical complex. If we build 15–20 such plants in our country, then the Russian budget will receive a surplus value 5–8 times higher than the price of export supplies of crude oil. Then the country’s budget will not depend on the vagaries of the global economy, and the Russian ruble will cease to be “wooden” and will return to the level of 30 rubles per dollar.
Norway annually produces 100 million tons of oil. In this northern country, oil education provides free education and medicine, housing and communal services, high pensions and benefits for the poor. Moreover, this northern country supplies cherries and strawberries to Europe. There 200 thousand farms fully provide their citizens with meat and dairy products. As we see, a country cannot have an “oil curse” if people are in power who know how to dispose of the natural resources given from above.
Oil has always been a common commodity: today it is produced in almost 100 countries of the world. Nearly 40 years have passed before the futures contracts undermined the power of OPEC in the field of setting prices for crude oil. Currently, the price of oil is set instantly on the open market in the trading floor of the exchange. Advanced oil production and reduced demand for this product in the world infected with coronavirus led to overstocking the global oil market. Some companies have to sell it at a negative price to get rid of oil. In this situation, only coordinated actions of the OPEC + member countries would allow not to bring down the price of oil. However, this did not happen, as a result of which the Russian oil industry leaves the budget without a lot of money, and the subsoil without big oil.
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