Actually it is an old voice but one that had been absent from the recent news on this topic. After several Russian officials denied any interest in joining OPEC in cutting production to support oil prices the real leader of Russia returned to the microphone.
Russia's Prime Minister Vladimir Putin said the country must act to influence oil prices hit by the global economic crisis. This would be a significant change by the second largest crude exporter on the planet.
Putin said, "We need to work out a whole range of measures that will allow us to ACTIVELY influence the market. As one of the major exporters and producers of oil and petroleum products, Russia cannot stand aside from formulation of global prices for this natural resource."
Just last week a prominent Russian official said as long as oil prices remain over $60 that would be fine. Another went on record as saying Russia would continue to implement an "independent strategy" with regards to its energy policy and while they would send people to the OPEC meetings to learn about new technology they had no interest in joining OPEC in its production cuts.
Putin also said, "The world financial crisis, the instability on international markets and raw materials and the fall in the price of oil, demand that we adopt measures that will ensure lasting development of the sector in current conditions."
Actually Putin's sudden willingness to set the price of oil should be no surprise. Russia has actively intervened in the price of natural gas it supplies to most of Europe. Massive price increases, sudden halts to supply and strong language have enforced its will for higher gas prices. I have warned in these pages before that Russia was going to be a force to be reckoned with once peak oil arrives. They view their energy resources as a weapon to be wielded in whatever manner needed to bring countries inline with their views and to keep the national budget running smoothly. I am not surprised to see Putin reassert control. I am only surprised it took him so long to do it.
OPEC continued to make noises on Tuesday about another production cut. With prices falling under $60 for light crude the panic is starting to spread among producers. Japan's oil demand fell -6.9% last month and OPEC is expecting similar drops in other Asian economies. Merrill Lynch expects further declines in 2009 for oil products. Merrill said last week that they were seeing sudden sharp declines in demand across all major consuming regions as global economic activity contracted. The IEA is expected to cut demand estimates for 2009 for the third consecutive month when they release their monthly oil report.
Personally I think demand in the U.S. is about to sprint higher. With gasoline prices under $2 in seven states the driving habits of U.S. consumers will return to full use very quickly. Des Moines Iowa had the lowest prices on Tuesday at $1.78 per gallon. How fast do you think $1.75 gasoline will stimulate demand going into the holiday season?