Interview by Maria Sidelnikova, exclusively for Vestnik Kavkaz
The IMF has lowered its prediction for world economic growth in 2015 to 3.5%. The revised forecasts are associated with the reassessment of economies in China, Russia, the EU and Japan, and descent in some oil-exporting countries as a result of dropping oil prices. Leonid Grigoryev, the chief advisor of the head of the Russian Presidential Analytical Center, has described the factors affecting oil prices in an interview with Vestnik Kavkaza.
- What do you think influences the formation of oil prices and can they be stabilized?
- The market has excess of oil, if we take the current level – up to 1 million barrels a day, i.e. about 1% of world consumption. Could someone just cut a million barrels? In reality, only Saudi Arabia and Kuwait can do it, because they have such types of technologies, big reserves, the budget needs a little less, they have freedom of hand. However, they do not have any special need to do it urgently because, in terms of finances, everyone can get through a few months of low oil prices. The question is what would happen if the situation remains for a year or two. Almost all the main exports have set an oil price of $80 per barrel in their budgets. Of course, Nigeria, Venezuela need a little more, over 100. In fact, we will see huge financial problems in oil-extracting states. The U.S. will have problems too, it has a whole set of sectors affected. So the main problem we will see now is readjustment of projects in oil extraction, oil refinement, inter-fuel and interstate concurrence to new prices. This is a breach of fantastic proportions. Let’s see how the countries suffering from low oil prices the most would put pressure on colleagues. In 1986 and 1998, they ran into the same trap twice. After that, it took years to get back to some stable prices. I think that the decisive question today, of whether any correction of prices would occur with the help of OPEC, will be answered in March.
- Can the countries of the Caspian five have any effect on correction of oil prices?
- No. The volumes here are relatively low. Iran is only just coming out from under sanctions. Even together, they would not produce enough volumes of oil to cut a million barrels a day.
- Do the actions of the Islamic State terrorist group in the Middle East have any effects on higher oil prices?
- Absurd as it is, they have no effect. In other conditions, if they were threatening oil extraction, let’s say, in Southern Iraq or Kurdistan, it could have caused a rocketing of prices, the way it happened in Libya. ISIS, since it needs money, was selling oil for $25-30 per barrel. In other words, what could cause an immediate effect is not a threat that would have been raising prices, yet dampening that would be reducing them. The reserves there are not very big, but they have failed to provoke a rise. But the Middle East remains very volatile, and, in the long run, I think everyone understands that Russian oil is a lot more reliable in this aspect.
Interview by Maria Sidelnikova, exclusively for Vestnik Kavkaz The IMF has lowered its prediction for world economic growth in 2015 to 3.5%. The revised forecasts are associated with the reassessment of economies in China, Russia, the EU and Japan, and descent in some oil-exporting countries as a result of dropping oil prices.Leonid Grigoryev, the chief advisor of the head of the Russian Presidential Analytical Center, has described the factors affecting oil prices in an interview with Vestnik Kavkaza.- What do you think influences the formation of oil prices and can they be stabilized?- The market has excess of oil, if we take the current level – up to 1 million barrels a day, i.e. about 1% of world consumption. Could someone just cut a million barrels? In reality, only Saudi Arabia and Kuwait can do it, because they have such types of technologies, big reserves, the budget needs a little less, they have freedom of hand. However, they do not have any special need to do it urgently because, in terms of finances, everyone can get through a few months of low oil prices. The question is what would happen if the situation remains for a year or two. Almost all the main exports have set an oil price of $80 per barrel in their budgets. Of course, Nigeria, Venezuela need a little more, over 100. In fact, we will see huge financial problems in oil-extracting states. The U.S. will have problems too, it has a whole set of sectors affected. So the main problem we will see now is readjustment of projects in oil extraction, oil refinement, inter-fuel and interstate concurrence to new prices. This is a breach of fantastic proportions. Let’s see how the countries suffering from low oil prices the most would put pressure on colleagues. In 1986 and 1998, they ran into the same trap twice. After that, it took years to get back to some stable prices. I think that the decisive question today, of whether any correction of prices would occur with the help of OPEC, will be answered in March.- Can the countries of the Caspian five have any effect on correction of oil prices?- No. The volumes here are relatively low. Iran is only just coming out from under sanctions. Even together, they would not produce enough volumes of oil to cut a million barrels a day.- Do the actions of the Islamic State terrorist group in the Middle East have any effects on higher oil prices?- Absurd as it is, they have no effect. In other conditions, if they were threatening oil extraction, let’s say, in Southern Iraq or Kurdistan, it could have caused a rocketing of prices, the way it happened in Libya. ISIS, since it needs money, was selling oil for $25-30 per barrel. In other words, what could cause an immediate effect is not a threat that would have been raising prices, yet dampening that would be reducing them. The reserves there are not very big, but they have failed to provoke a rise. But the Middle East remains very volatile, and, in the long run, I think everyone understands that Russian oil is a lot more reliable in this asp
