Oil Price Collapse Pushing Russia’s Economy To The Edge
By Andy Tully
OilPrice.com
Mon, 18 January 2016
The price of oil is falling faster than Russia can adjust its budget.
In June 2014, the global price of oil was over $110 per barrel. But due to a glut in supplies from elevated production from North America, Russia, as well as OPEC countries, oil prices have collapsed.
For Russia’s benchmark crude, Urals URL-E, the price fell to around $27 on Friday. Yet Moscow’s budget for fiscal 2016 was predicated on oil costing twice as much – $50 per barrel – itself a painfully low price.
On Saturday, Russian Finance Minister Anton Siluanov went on television to say this exceptionally low price for Urals oil meant a further reduction in revenues for his country’s budget, leading to an expected deficit of $38.6 billion for Russia in the coming fiscal year.
“Therefore there is a difference of two times [in revenues], and I want to say that for budget income this difference equates to over 3 trillion rubles [$38.6 billion],” Siluanov said during the televised interview. Russia depends on sales of oil and gas for about half its annual budget revenues.
The collapse in oil prices has also hurt the ruble, which has lost more than half its value compared with the U.S. dollar since the summer of 2014. But Siluanov said he didn’t expect significant further devaluation of the Russian currency simply because the price of oil can’t fall much further than it already has. “Our main export commodity [oil], as we have already discussed, fell in price by four times,” Siluanov said. “One can hardly expect prices to fall four times further compared to today’s level.”
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