Every resident of Russia is well aware of the situation that has developed on the territory of his country. Over the past few months, the ruble has fallen dramatically, which has affected the sharp rise in prices. Buying currency has become almost impossible, and banks are having some difficulty cashing out the large capital of their customers. Plus, the price of oil fell, which fell back on the economy of the state as a whole.
Why oil has fallen in price, or Theory of a political conspiracy
Considering the situation in Russia exclusively from an economic point of view, many experts note the presence of a political component in the events on the oil market. Many put forward the theory that a sharp drop in oil prices is an attempt to “crush” Russia because of its actions against Ukraine. A parallel is being drawn with the events that took place in 1979. After the trouble in Afghanistan, the US artificially caused a decline in the cost of “black gold”, thinking that this would inevitably lead to the collapse of the USSR. Whether this is the situation now and what threatens Russia with a drop in oil prices, it is probably impossible to say. It remains only to evaluate the economy of a great state.
What is the situation on the oil market today?
If a few years ago in the world there was talk of an energy crisis, today they have already been forgotten. In the oil market, supply goes several steps ahead of demand. This is due to an increase in fuel production in the United States. It is America today that occupies one of the leading places in the export of petroleum products. A sharp increase in production is also planned in Canada. Russia and Saudi Arabia supply fuel to the international market in the same volume. The fall in world oil prices was caused by the fact that the largest consumers of fuel (USA and Canada) today not only stopped buying fuel, but they themselves began to export it. Libya returned to the market after internal military conflicts and Iraq with the support of the United States.
What makes predicting oil prices more difficult?
Many analysts cannot predict when the decline in oil prices will end. This is due to the specifics of the fuel trade. In the international market, real goods make up only 5% of the total turnover. The rest of the mass of commodities is futures, which are contracts for the supply of fuel in the future. Sometimes the price of "black gold" is affected by wars and natural disasters, economic collapses. In this case, it also happens that the price of the goods remains in a static state even with strong changes in the world economy. The only fact that remains obvious is that the supply exceeds demand, and the situation will not change in the near future.
Russian economy and energy
Nobody can say what threatens Russia with the fall in oil prices, but it is still possible to trace the unambiguous connection between the situation on the energy market and the state economy. Since 1999, the latter has been actively growing (up to 2001). This was accompanied by the devaluation of the national currency and the optimized labor of the domestic producer. From 2003 to the present, Russia's well-being has been directly linked to the active increase in energy prices around the world. The favorable situation allowed the country to pay off external debt and increase CBR reserves by more than $ 425 billion.
It is alarming that the country’s economic relations with Europe are far from the best. EU countries are gradually abandoning Russian fuel supplies, tending to cooperate with Saudi Arabia. Everything is going to lift sanctions from Iran and restore the supply of Iranian oil to the world market.
Russia's full dependence on the oil market
What threatens Russia with a drop in oil prices is fairly easy to guess, since the country is completely dependent on fuel exports, especially today, when other industries began to bring minimal revenue to the budget. So, the Accounts Chamber in 2014 announced a budget increase due to oil trade by 1 trillion rubles, as well as a reduction in revenues by 300 billion rubles from all other activities. Not only oil, but also gas exported by Russia, have aggravated the situation. The decline in oil prices has led to a drop in the cost of gas, since energy pricing is synchronous. There is a growing deficit of 0.5-0.7% per year.
Only constructive changes in the economy and active injections into the development of other industries are capable of changing the situation. State regulation, fiscal pressure on business and corruption prevent the establishment of new orders. Among the turbulent sectors of activity that could ensure the stability of Russia in the future, we can include agriculture and metallurgy.
Excessive development of the oil and gas industry has become the reason that entrepreneurs do not want to develop, they have no incentive. As a result, a drop in the popularity of domestic products on the world market was noticed. Most industries are oriented towards domestic consumers, which bears a striking resemblance to the order that reigned in the days of the USSR.
The military-industrial complex and the nuclear industry are somehow saving the country. Products of industries are very popular in the world. Unfortunately, in comparison with the oil and gas sector, the turnover of products can be called scanty.
Russia's budget and falling oil prices
Russia's budget over the next three years is calculated on the basis that the price of oil will not fall below $ 96 per barrel. This limit was considered the key to the welfare of the country. In fact, Brent crude oil (delivery dated December) is currently priced at $ 78. This is 30% cheaper than the market suggested in June. Despite the disadvantage of the situation, exporting countries do not intend to reduce fuel production. After the price of oil fell, foreign exchange earnings from its sales decreased threefold.
In parallel with the reduction of the Russian budget, the ruble has been reduced. The deficit of the American currency has created a critical situation in large commercial corporations, since the need to repay credit obligations in foreign currency has not gone away. The behavior of the population escalated. People, in an attempt to preserve their savings, began to massively buy up currency. Demand exceeded supply, and the rate soared in a matter of days to a historic peak. When there was a fall in the price of oil in 1986, the situation was mitigated by the presence of a financial pillow, which allowed the country to survive in difficult times without much damage. Today, the supply of funds in banks is very limited, which makes Russian citizens worry. Plus, the government this year spent about 90 billion of reserve currency in attempts to somehow maintain the ruble exchange rate. The situation could not be stabilized.
What threatens Russia with a drop in oil prices?
Hard times have come in Russia today. It is worth considering the fact that the reason for the fall in oil prices is not one. The government of the state itself added fuel to the fire. According to analysts and world economists, the situation on the world oil market may become a prerequisite for the collapse of the financial system, 50% of which is profit from energy sales. Experts also believe that the decline will continue until the cost of a barrel of oil completely covers the cost of its production. At the moment, the price indicator has slipped by 38%. And while not going to stop. At the end of 2014 and the beginning of 2015, the situation was identical to the one stimulated by the fall in oil prices in 2008.
How has the oil situation affected world countries?
Shale oil producers in the United States will cover their costs for the extraction of fuel, if its cost will vary within $ 40. According to the energy agency, the cost of a barrel of $ 42 will not overshadow the costs of producing “black gold” in the Bakken formation, which OPEC member states are actively crowding out. In other countries, according to the Monetary Fund, the situation is as follows:
- Kuwait, the UAE and Qatar are expecting a cost of $ 70 per barrel.
- Iran - 136 dollars.
- Venezuela and Nigeria - $ 120.
- Russia - 101 dollars.
With a decrease in these indicators, the above states will be gradually covered by the crisis state. And here, no reason for the fall in oil prices will matter.
The impact of oil and the dollar on the lives of Russian merchants
Lower oil prices in 2014-2015 accompanied by a sharp increase in the dollar, which for the Russian government remains the most liquid commodity. The currency shortage forced the state to assume not only social, but also many other obligations to citizens. More recently, part of the revenue in foreign currency was sold, and people bought for rubles purchased. Today, the ability to fulfill obligations can only be realized by issuing (printing money). The shortage of dollars - as a consequence of falling oil prices - not only complicated the process of purchasing imported goods, but in some situations made it completely impossible. By the way, imported medicines and medical equipment, office equipment and mobile phones, fabrics, machine tools and other goods account for more than 80% of the market.
The obvious consequences of falling oil prices are hidden in the import of goods. Sales volumes are falling dramatically, prices are rising, the population has ceased to be solvent. The first were hit by importing companies, as their services were no longer relevant. Following "into the abyss" flew related companies, in particular, transport organizations, warehouses and others. As a result, a sharp jump in unemployment and rising levels of poverty.
How does the fall in oil affect ordinary citizens
The fall in oil prices has led to global changes not only in the country's commercial sphere. Due to the lack of material resources and the attempts of the state to save, financing of many programs ceases for a while. Funds cease to flow into the construction industry. Social benefits are reduced. In the banking sector, the number of useless loans increases significantly, which leads to the bankruptcy of financial institutions. The increase in consumer prices covers not only foreign goods, but also domestic ones. The cost of production increases as a result of the need to pay higher wages. At the same time, all the average residents of the country are not able to provide themselves with the minimum conditions necessary for life.
