The International Monetary Fund confirmed the forecast, according to which the Russian economy in 2015 will decline by 3.4%. Now the ruble is continuing to fall after reports of a decline in world oil prices. Experts are careful about a dramatic increase in production of the "black gold" in Iran after the lifting of sanctions.
The Head of the Center for International Energy Markets Studies at the Energy Research Institute of the RAS, Vyacheslav Kulagin, says that ‘‘we saw a normal level of supply and demand at the level of $100 two years ago. Those prices were basically normal. They suited all of us and we spoke about it. But then there were extra production volumes in the market. Additional volumes associated with the production and known increase of a capacity factor of production in the United States, Canada and Iraq. Those were quite serious volumes of supply in the market. But demand was much worse than we had expected.’’
‘‘No one expected the situation in Greece, and the economy's decline influences the falling of indicators in energy demand. This is quite obvious. That is, the level of supply and demand became imbalanced,’’ said the expert.
According to him, the prices of different products in the western countries declined in respect to the dollar equivalent. Because the dollar has significantly strengthened. This fact has added extra human and other resources to the market. And the prices began to fall. And if you look at these prices for the equivalent in euros, i.e. in other currencies, we can recall the gap between the dollar and the euro, which was about 1.5 times not so long ago. This gap has almost disappeared. The currencies are at the same level. It means that the euro, and everything that is made in euros, became cheaper about 1.5 times,’’ noted Kulagin.
According to him, the ruble’s decline is more serious, as the costs of Russian companies are exactly basically in rubles. ‘‘The foreign exchange rates and prices slumped all over the world, especially in those countries where the rates of national currencies didn’t depend on the dollar. Due to these factors we can see a real balance of supply and demand at the level of $80," said the expert.
However, according to him, the oil price isn’t $80, but $50-$60 in the market. ‘‘It means that it is beneficial to exporters to understate the price at the time when demand exceeds supply in order to keep market share. Besides, the project needs the price of $80, including capital and operating costs. Capital costs have already been incurred, but the current operating costs can be about 20 dollars for the company. And if the company closes the project, it will conditionally lose one billion dollars. If it doesn’t close it, but trades according to the price of $50, the company will lose not a billion, but much less. Accordingly, it is beneficial for companies to hold these projects,’’ says Kulagin.
He reminded about Shell’s statement about a significant reduction in personnel and investments. ‘‘One after another company is announcing this. That is, one after another company reduces investments in new projects, postponing and suspending them. It is an adjustment of the market, which we are expecting. The adjustment should lead us to a balance of supply and demand. It will take some time, maybe a year, or even more. But when we come to the balance of supply and demand, then we can expect a return to prices at a level of around 80 dollars.’’
