Oil prices have gone up sharply after US president Donald Trump withdrew from Iran Nuclear deal on May 8, 2018. Considering rising oil prices, US has increased its oil production at a very fast pace. It is estimated that latest by 2019 US will surpass Russia and Saudi Arabia in oil production and will become the biggest oil producer in the world and will dominate the oil market.
OPEC and Saudi king’s decision to increase the oil production by more than 1 million barrels per day will be helpful in containing the rising oil prices by balancing the demand-supply.
Faith Birol,executive director of International Energy Agency, at an event in Tokyo in February 2018, said – “US shale growth is very strong, the pace is very strong… The United States will become the No. 1 oil producer sometime very soon”.
Birol said that US crude oil output rose above 10 million barrel per day late last year for the first time since the 1970s,while overtaking top oil exporter Saudi Arabia. United States would overtake Russia as the biggest oil producer definitely next year, if not this year.
On May 8, 2018, US president Donald Trump decided to withdraw from Iran Nuclear Deal and to re-impose sanctions on Iran. After that US threatened all the countries to stop doing business and trading oil with Iran by November 4, 2018, otherwise they will be sanctioned by US.
Oil prices climbed sharply after President Trump’s decision on Iran Nuclear deal. The main reason of the sharp increment in the oil prices would be the shortfall of crude oil in the market after US sanctions on Iran will be in effect.
After that, in OPEC meet in Vienna on Saturday, June 23, 2018, considering the energy requirements of developing economies, OPEC decided to increase the oil production by 1 million barrel per day to contain the rising oil prices. Thereby, the shortage of oil produced and exported by Iran and Venezuela can be fulfilled.
After OPEC meet, US president Trump tweeted on June 30, 2018, that Saudi King Salman has agreed to increase the oil production by 2,000,000 barrels per day.
According to IEA, US will become the biggest oil producer by 2019. US will dominate the oil market and may use its influence to control the oil prices, so crude oil prices may go up further. This will be in the favor of US, but this will increase the burden on the developing economies, which are completely dependent on the import of crude oil for their energy requirements.
More Recently, Iran blamed US for the increasing prices of crude oil. Iran’s representative at OPEC said- “With your frequent and indecent tweets oil prices has gone up 10 dollars”. This clearly says that stated that trump should stop tweeting about the oil prices.
As per figures of IEA, US have been continuously reducing import of crude oil, but import of crude oil by India and China is continuously increasing following the Iraq invasion by US in 2003.
During the time of increasing prices of oil, reduction in oil imports by increasing the in-house production may be beneficial for US’ economy. Meanwhile, its move of imposing sanctions on oil producers like Iran and Venezuela did not do any good for economies of these oil producers and economies of the countries that are completely dependent on oil imports for their energy requirements.
OPEC and Saudi king’s decision to increase the oil production by more than 1 million barrels per day will be helpful in containing the rising oil prices by balancing the demand-supply ratio. Thereby, the oil import bill of India and other developing economies will not hurt their domestic and economic development. Saudi’s decision to have an increase in oil production will protect world economy from negative impacts of US sanctions on Iran and Venezuela and it will be a challenge to US’ move of escalating the oil prices.