Posted on 01/28/2016 4:40:26 AM PST by elhombrelibre
Eight years ago, Senator John McCain declared that Russia, under Vladimir Putin's administration, could only afford to be a major player in world affairs as long as energy prices remained high. In 2016, his thesis will be tested. With oil prices dipping below the $30 per barrel mark, and with Russian companies like Lukoil warning that prices might hover in the low $20s range—on top of sanctions that the United States, Japan and the European Union continue to maintain (through midyear at minimum)—has the Kremlin's luck simply run out? And what of the dream of recasting Russia in the twenty-first century as an "energy superpower?"
For the last decade, high energy prices for oil and natural gas produced a golden river of tax and dividend revenue for the Kremlin that could be used to rehabilitate the social welfare safety net and to sustain a Russian middle class of professionals employed by the state. In more recent years, that surplus was used to undertake a massive modernization program for the Russian military. If, as some sources have suggested, global oil prices will, over the next seven years, stabilize in the $40 per barrel range, the funding strategy employed by the Kremlin in the past will no longer be feasible. The only way to recoup even some of those lost revenues is for Russia to increase exports so that quantity helps to make up for smaller revenues.
(Excerpt) Read more at nationalinterest.org ...
http://www.forbes.com/sites/kenrapoza/2016/01/26/russian-economy-holding-on-for-dear-life/#2365c1ec590f
Tomorrow’s headline: “Putin in discussions to join OPEC”.
"Russia wants to talk to OPEC about output cuts to bolster oil price"
http://www.cnbc.com/2016/01/27/russia-wants-to-talk-to-opec-about-output-cuts-to-bolster-oil-price.html
Russians are not like spoiled brat Americans. They can withstand a lot of pain and suffering, to the point of eating grass. They will simply wait it out as compared to what will happen when our own economy collapses.
Russia Debt-to-GDP ratio = 15%
American Debt-to-GDP ratio = 100%
You’re right. Things are swell there.
That will work well. All of them will have to pump oil like crazy to support the level of revenue they need. Add Iran dumping oil on the market and the outlook isn’t good for any country relying on exported oil to support their economy.
The war between the Saudis and Russia over Syria won’t help either. It’s a race to the bottom as oil inventories pile up. And if the price of oil rises enough, shale oil comes roaring back. and it can be exported to place more pressure on OPEC.
When the Saudis allowed oil prices to skyrocket, they screwed themselves. We’ve got a lot of wells drilled that have never been produced.
As our LNG export capacity expands, Russia is looking down the other barrel of the double barreled shotgun. American natural gas means Russia can no longer extort Europe.
That’s how the US drove the former Soviet Union into bankruptcy - keeping oil prices artificially low. Don’t know if it will work this time since Russia and China are teaming up to create their own reserve currency.
VANNESS: Russia, China preparing to eliminate our reserve currency status
http://www.washingtontimes.com/news/2014/nov/18/van-ness-russia-china-preparing-eliminate-our-rese/
Russia and China: The Dawning of a New Monetary System?
http://www.globalresearch.ca/russia-and-china-the-dawning-of-a-new-monetary-system/5423637
Yuan Set to Become a “Reserve Currency?â€
http://www.wallstreetdaily.com/2015/10/16/yuan-reserve-currency-china/
CHINA READIES DIGITAL CURRENCY
https://www.youtube.com/watch?v=6wU9Q8rpe0c
another way to characterize the situation is looking inward.
russia will have to exist on internal resources to carry on.
That is the situation here desired by many conservatives who want America to isolate its self from the world.
Let the Saudis and Iran fight it out and destroy each others infrastructure. We parachute in and export oil/nat gas.
Shale isn't competitive when prices are this low.
So don’t tax the producers and they may be able to make a profit. Right?
If the $30 to $40 a barrel price isn't enough for the shale producers to make a profit to tax then cutting taxes isn't going to make a difference.
This is not about the people but how much pain the government can stand.
You can bet that Putin has considered starting a war in the ME to drive prices higher.
Do you know at what point they break even?
We don’t need their oil and gas.
It varies from producer to producer but the average breakeven prices I've seen published are in the $55 to $60 a barrel range. It's down from the early days and is probably still moving downwards but I don't think it's near the $20 to $30 price people are talking about.
Does anybody besides Russia care?
They survived the Siege of Leningrad. I’m pretty sure they’ve got this.
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