Oil price reduction & Russia economy Arkan aljanabi00002395

The main oil supplier in the world are Opec.. U.S.ARussia According to above statistic …OPEC produce (81%)

Introduction

the oil price got cut nearly 60% oil price

Supply is high & demand is low

The supplies are losing but still they are bumping more oil in the market …!!!!

Why ..?

oil price reduction

• Opec refused to reduce the oil bumping to the market, why?1- Saudi Arabia, Gulf producers have amassed considerable foreign currency reserves, which means that they could run deficits budget for several years if necessary.

• Saudi Arabia hopes that lower prices would help throttle the US shale boom. So oil went into free-fall.

• 2- U.S. supplies aside, Saudi Arabia's crude exports hit their highest level in almost a

decade in March? But why?

Oil price & Russia • Low prices gives high profit for oil

consumers

• But it’s gives negatives impact on countries reliant on oil sales. for example, Russia lost $100billion which what the Saudi Arabia and U.S.A WANT.

•

Saudi ARABIA WAS IN FAVOR OF LETTING PRICES CONTINUE TO FALL…

Political reasons1- Saudi Arabia do pressures on Russia to stop supporting Syrian regime…2-U.S.A threating Russia by oil price to stop the war in Ukraine …

Russia suffering from oil price reduction

• Russia is one of the world's largest oil producers, but

• "We had to abandon a number of programs and make certain sacrifices.” Frankly said

• The government has cut its growth forecast for 2015, predicting that the economy will sink into recession.

Its Interest rate hike to 17% and it can chock economic growth by making harder for businesses to borrow and spend

Russia suffering • Russia loses about $2bn in revenues for

every dollar fall in the oil price, • the World Bank has warned that

Russia's economy would shrink by at least 0.7% in 2015 if oil prices do not recover.

• The slump in oil prices has clouded Russia's economic outlook because of reliance on oil exporting….

• Russian Finance Minister said that if a barrel of oil were priced at $60, the Russian economy could contract by 4 percent in 2015, but oil price fell to $47..

Consequences • Low prices gives high

profit to oil consumers.

• falling oil prices were leading to $100 billion losses to Russia which is a major oil exporter..

• So the country is getting killed by cheap oil price.

• But both Syrian and Ukraine crisis not solve..

•

•

Recommendation 1

because of Saudi Arabia has hailed its policy of squeezing the US crude which have struggled to compete with the kingdom.. So, The price will be recovering because U.S.A oil crude cost too high .therefore, U.S.A should reduce the production of crude in next months…

oil price will be stables by the supply and demand in future. because, most of the producer losing right now and they cant continue run in deficit budget..

Recommendation From these two point, Russian economy will

be recovering, and gain more billions but Russia should not be fully reliant on oil

production. Russia has to allow (FDI) and innovate

private firms often partner with foreign counterparts, which would bring more international stakeholder support for Russia’s future.

It’s Better financial transparency and regulation in Russia would help it gain more access to international capital markets.

and its has to find new economic initiatives and it has to introduce plane for that and implement it….

Recommendation Russia should stop supporting

Bashar Alassad to save the money and to solves the issues with Saudi Arabia…

Russia have to stop interfering and the war in Ukraine to solves the problems with U.S.A.. Russia has to reach accommodation with Ukraine, its largest gas customer and transit country.

Oil producer countries have to forget their problems and work together for their profits…

Conclusion the major oil producer countries should solves their political problems and concentrate to improve their economy.All the producer are losing right now because of the oil price reduction , so they should corporate to make the oil price depend on Supply & demand