Bloomberg has a story out on how recent fluctuations in oil prices are having an effect on Russia’s already precarious finances:
Russia needs Urals, its main export crude blend, to trade at $100 per barrel or higher to avoid a recession, according to 58 percent of respondents in a survey of 19 economists. Given the level of U.S. and European sanctions over Ukraine, at least 19 percent of analysts said the current price is sufficiently low to put Russia’s financial stability at risk. […]“Even if the oil price should recover to low three-digit prices again, Moscow’s hands are rather tied — the budget is already ailing and the potential funding needs of the banking system could quickly eat up all free resources,” Wolf-Fabian Hungerland, an economist at Berenberg Bank in Hamburg, said by e-mail. “And its rainy day fund is just too small to be a game changer.”
The price of oil reflects both demand and supply. On the demand side, weak growth in Europe and China has helped depress prices. But it’s on the supply side where things really get interesting. The big oil exporters like Iraq, Syria, and Libya have all experienced sustained turmoil in recent months, the likes of which have historically been reflected in significant price spikes. But these spikes have not come to pass.For one thing, the Saudis, Kuwait and the UAE are pumping like there’s no tomorrow. Not only do they need to keep their own people happy (and docile) amid the region’s turmoil, they are now committed to propping up clients like Egypt and engaging in all kinds of foreign policy activism in the region. For the Saudis, a side benefit of this is that Iran feels the pinch, as it, too, has a higher break-even point. For the U.S. and Russia, it helps keep Putin in a bind as well.But let’s not forget that this time around, there has been a new, more stable producer able to partially offset disruptions in the Middle East and North Africa: the United States. The American shale revolution has unleashed a wave of crude on global markets, and has acted as a stabilizing force during a tumultuous time. President Obama’s geopolitical headaches would be raging migraines were it not for the new U.S. contributions to oil markets. And for that, this president has fracking to thank.