How Russia Oil Market Affects their Economy

How Russia Oil Market Affects their Economy

OPEC and allies' production cuts have prompted analysts to raise their forecast for oil prices at $56 per barrel in 2018.

Russia has become a huge contributor to the availability of oil in the world, reaching the number 12% by the statistic, including oil production and export. It made Russia be the second largest oil contributors in the world. They gave 70% of the Oil Production in the form of crude oil to the global world, and only 30% used on their own. They transfer the crude oil through the Transneft pipeline. This pipeline owned by Russia and monopole by them. They also export more than 80% of their natural gas, timber, and metals. On 2007, Russia has 8.1% Gross Domestic Product and made it be a number seven on economic expansion. This country economic had grown rapidly from the years of 2000 until 2007. And this growth really depending on oil and natural gas export. The high world oil prices made it even better. On 2004, this economic boom was being controlled by the government through the stabilization fund. On 2007, this fund reaches $158 billion, which means 12% of country GDP.

In winter 2008, the oil world price has decreased from over $60 per barrel to $40 per barrel and made a significant decreased to their GDP, made the government realized that the country had not had to depend on oil export only. This up and down of oil world price made Russia's economic sector became vulnerable, more than the other country. The ascension of $1 of oil world price, Russia will earn $1,7 billion a year. Though so, the long slumps of oil world price will mess the count on what Russia was expecting. There were two most intensive periods when Russia's economic was changed. It has happened in 2008 when the world price of oil grew to 8%, but then have a contraction until 6.5% in 2009. This extreme period has made the economics of Russia became unstable.

The decreasing of oil world price considered to have a possibility to impact the devaluation of Russian currency, Ruble. There was a big hole in the economic calculation of the budget. They have to trim their expenditure in 2009 to survive their economic condition.

Russia did the biggest oil export to U.S and Europe, but then both of these countries have a recession, and government makes a policy to reduce consumption of oil. This policy has made Russia oil demand to decrease. Then the Russia government steer the wheel to Asia-Pacific oil market, which has a rapid and significant needs of oil. Large economic growth country like China, South Korea, and Japan have made Russian oil quality price higher among them.

Russia expected the ascension of oil world price, so they will soon make a recovery as the global economic recovered. Also, Russia might slip off from the global financial crisis as the ascension of the oil price. On 2010, the expert has predicted the price of oil will be about $70 until $75 per barrel, which means they will have an additional budget from about $19,5 billion to $26 billion.