The different reactions of the American and Russian oil companies to the low oil price

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented on the impact of low global oil prices on Russian and American oil production to the Neft and Capital Internet portal.

Alexey Gromov explained that in the United States, the rate of increase in production is determined by its cost, i.e. if the price on the world market is high, it encourages companies in the United States to drill more actively. But in Russia, everything is somewhat different. The cost of production in Russia is slowly growing, including due to an increase in the number of hard-to-recover reserves, but it is still significantly lower than in the United States.

"In America, the average cost of shale production (it occupies a large part of the industry), according to the companies themselves, is about $50-55. It turns out that with current WTI prices below $60 per barrel, companies in the United States do not generate normal profits to stimulate production in shale projects. Yes, due to consolidation in the industry, giants like Chevron will be able to work under such conditions for a while, but small companies will suffer.

If the price of $ 60 remains, the inflow of investments into shale production will decrease significantly, and taking into account the technological cycle of such production, this will lead to a drop in production, and maybe even by 700-800 thousand b/d by the end of 2025," the expert believes.

However, according to Alexey Gromov, the same global prices will have a much lesser impact on companies in the Russian oil industry. Oil producers are almost not sensitive to external prices, but the Russian budget is sensitive in terms of fiscal revenues. For companies in Russia, a critical indicator of the global value of black gold is about $30-40 per barrel. Therefore, they can safely operate at both $60 and $70 per barrel. But the budget will not receive the usual amount of taxes. For this reason, the Russian government will try to stimulate the country's oil sector to increase production in order to compensate for budget losses due to falling prices.