Saudi Arabia is Buying Russian Oil on the Cheap

Saudi Arabia is sweeping in to buy cheap Russian oil on one hand, while selling high priced stuff to the West on the other.

We’re in the midst of an energy crisis in the West, with a major part of this issue being the war in Ukraine. Pressure has been put on the supply lines from Russia, which is one of the largest energy producers outside the Middle East. This situation has been made worse by countries banning imports of Russian oil.

This means that Russia has lost a lot of buyers, and their oil is now bloody cheap. The whole point of sanctions is supposed to be that it fucks over the country in question, making them think twice about what they’re doing.

In this case, the idea is that if Russia can’t make money from their energy exports, maybe Putin will think about pulling out of Ukraine to turn the cash machine back on.

But that’s not what’s happening.

Oil Demand is High and OPEC Limits Supply

The demand for crude oil is massively high as supply chains across all different parts of the economy aim to work through the pent up demand accrued throughout the pandemic. There are numerous bottlenecks in the production process for loads of goods, meaning companies are working overtime to clear them.

This uses more oil.

The oil cartel OPEC are always cagey about how much oil they produce, because flooding the market with too much at one time can crash the price. They don’t want that, because low oil prices ain’t good for the Bugatti garage and the custom private jet collection.

However, Saudi Arabia needs more oil for themselves right now. They use a lot of it to fuel their own power stations, and need to crank up in summertime when the air conditioning in the Kingdom needs to run overtime.

After all, those heavyweight boxers and golfers can’t be enjoying their mocktails in an un-airconditioned room. Sportswashing is hot work as it is.

Russia Selling on the Cheap

Lucky for Saudi Arabia (plus China, India and a number of other African and Middle Eastern nations), Russian oil is on sale right now. If Russian oil was a meal deal, it’d be the Tesco prawn cocktail at 6pm on the day of expiry. On the nose and not at all popular.

It’s a cheeky move. It means that Saudi Arabia is able to keep selling high price crude oil to the West, while they top themselves up with cheap energy, which is only cheap because the West has placed sanctions on it.

So Russia is able to keep cashing energy checks, Saudi Arabia can play an arbitrage that nets them a tidy profit and the West gets screwed in the process with the highest fuel prices we’ve seen in decades.

Seems like bullshit to me.