Becoming cheaper "black gold" brings about changes in the world economy
The past year marked a record for the last five years fall in oil futures. While the "black gold" clearly lost in value, some states counted loss, others - profit. Falling oil prices brought about changes in the plans of the major geopolitical players. What will happen next?
Drop in prices of "black gold" to the lowest in six years divided the level of industry experts into two camps. Representatives of the first of them is called what is happening "conspiracy US and Saudi Arabia against Russia" and part of the sanctions, "the international community" to support the "democratic changes in Ukraine." Apologists of the second considers the current events of short-term trend that is about to be replaced by an increase up to a "fair price of $ 120 / barrel." However, according to experts SEC "Psyche", described in the article "The confluence of circumstances, or end of the oil era?" ("Terminal», No45 / 2014), the current downward trend - a good long time, and $ 30 / bbl. - Not fantasy. At the same time, starting to sell short, the United States solve problems, not related to the events in Ukraine, which (as well as the Russian Federation, by the way) is not among the priorities of the US. Likely contributing to a reduction in world energy prices, the United States intends to revive the real sector of the national economy by providing low prices for fuel and energy in the domestic market.
Moment to change the overall trend of the oil market very well chosen, because the external environment in April-September 2014 (without the influence of the United States) has changed dramatically due to:
◆ appearance of the three conditions necessary to support the decline in oil prices Muslim exporters (provision of US military aid to Saudi Arabia, Egypt and Syria in their struggle against "Islamic state"; Washington agreement for the provision of Saudi Arabia support the Syrian opposition, a change of attitude towards the United States "too tough "measures taken by the Government of Egypt against the" Muslim Brotherhood ");
◆ the largest in the history of mining oil supply with a minimum 1998 level of demand for it;
◆ increase in stocks of "black gold" in supertankers to the maximum to 2009 level of 50 million barrels .;
◆ long finding oil prices at a critical point, which does not allow the real economy of the importers to recover from the crisis of 2008- 2009 years .;
◆ increase in the price of petroleum products in many countries to the border of elasticity;
◆ tightening of administrative and criminal liability for manipulation in the stock market and, consequently, reduce the activity of financial speculators playing on the increase;
◆ lower economic growth and oil demand in China and India;
◆ the gradual transformation of the US from a net importer to a net exporter of energy resources, make internal US market increasingly closed;
◆ sale of oil assets of not less than 830 major investors;
◆ lack of "military premium" in oil prices during exacerbation of tension around Ukraine, Palestine, Iraq, Libya, and Syria;
◆ «sudden" budget revision for 2015 leading exporters of oil from the expected correction of quotations of "black gold" to the downside on 25 ... 35% of the original;
◆ redirect financial reserves of the Russian Federation on the formation of the necessary public opinion, support for Ukrainian separatists, the content of military forces in the Crimea peninsula and supplies by sea, it would be justified from an economic point of view, only the upward trend of oil and in the absence of international sanctions. Below the "Terminal" decided to compile the views of leading experts of Ukraine and Russia in the energy sector on the issue raised, which is exclusively provided by them at the request of our editorial board.
Anatoly VDOVICHENKO, chairman of the Union drillers Ukraine, academician of Ukraine ATN:
"I fully agree with the forecast prepared eksperta- of STC" Psyche "on 10 November. The downward trend in prices for" black gold "will generally be stable for many years. However, there are periodic bursts of short-term increase in prices, provoked by the efforts of financial speculators that have have a significant impact, especially in government. To force production cuts they will use not only the manipulation of information, but also attract ecologists for the organization to counter the development of oil production in promising regions. This may be different provocations and even subversive acts, including acts of terrorism.
Cheap oil is not everything is beneficial. It only interested representatives of the real economy and directly to consumers. However, their impact on pricing is largely reduced. All the rest, including the governments of several exporters interested in the growth of prices. Than they are higher, the more easy money and the more opportunities. One can agree with the predictions of the probability of Dennis Gartman in the distant future price drop to $ 10 / bbl., But the end of the forecast "oil era" talk early. Oil will long maintain its leading role in the fuel mix. While anything is possible, if there is widespread use of new high-energy sources.
In favor of further decline in oil prices, and say new evidence theory of inorganic origin of hydrocarbons, including confirmed the restoration of their deposits. This expands the territory promising for new large, even giant fields, as well as opens up prospects for the resumption of production at the waste areas. In addition, I note that improvements in technology prospecting, exploration and development of oil fields allows multiple of reducing the cost of production, and to stop this process any speculation will no longer be possible, since it involves most sensible representatives of the various spheres of activity.
In turn, consistent and purposeful energy-saving policy, the expansion of the effective use of other energy sources and modern resource-saving technologies, supported at the level of states and governments, reduce fuel consumption and therefore also reduce the price of oil.
Ukraine is inherent in the process is very lengthy relaxation with a decrease in world oil prices and a rapid response to their growth and even on ascending projections. In this case, return to the low price of fuel is not seen even at the lowest oil quotes. This is due to the lack of control over pricing power and the immediate interest of its members in the high prices as an inexhaustible source of easy money. If this approach continues, no effect on the real sector of the Ukrainian economy will not have cheap oil. As for the rest of the world, the further decline in oil prices have a positive impact on the development of the real sector of the economy, especially if the producer and the consumer will again be run directly, without intermediaries.
Roman Rukomeda, an expert on energy and political issues:
In my opinion, oil prices will fall to $ 60 ... 65 / bbl. After that, they will stabilize by the end of the second or third quarter of 2015 the price situation will largely determine the geopolitical situation. If the middle of 2015- Russia does not change the methods of conducting foreign policy, and will not stop the aggression against our country (and that happens, most likely), by the end of 2015, oil prices could fall even further, to $ 45 ... 50 / barrel. The end result of a deep fall in prices - the change of the political regime in Russia (global threat No1), as well as giving a new impetus into the global economy, including the transition to new energy resources and the gradual withdrawal of the hydrocarbon fuel.
In Ukraine, will be reduced prices for oil products, which generally will have a positive impact on the economy. However, its level will depend on the regulatory policies of the government. In addition, falling oil prices will gradually decline in gas prices, which will also have positive results. Ukraine has a good opportunity to use the current situation for the reform of the national economy and output into a new phase of growth already in 2016. The decline in oil prices will greatly assist Ukraine in the process of reducing its energy dependence.
The main geopolitical event that may occur if oil prices for a long time will remain at a low level - a change of the political regime in Russia with further reformation of the entire system of global interests and influence in Eurasia. Ukraine will continue to dwell in the midst of geopolitical shocks and practice collide with almost all possible risks, but will be able to take advantage of new capabilities in the event of action.
Volodymyr Omelchenko, director of energy programs of the Centre to them. A. Razumkov:
The main reasons for the decline in oil prices:
◆ slower than expected growth in the world economy;
◆ weakening and then the suspension of the US policy of quantitative easing;
◆ US cooperation with the countries of OPEC leaders to coordinate actions aimed at reducing the price for economic weakening the economic base of aggressive actions of the Kremlin in Ukraine and elsewhere.
Cheap oil is primarily disadvantageous Russian leadership as it denies its financial capacity to expansionist ambitions, formed in accordance with the concept of "Russian World". Lower oil prices and other harms producing countries with undiversified economies and rigid authoritarian control - Venezuela, Iran, Nigeria, Turkmenistan, Kazakhstan. Significantly weaker than the current situation will affect the countries with the lowest production costs and relatively diversified economies - Saudi Arabia, UAE, Kuwait, Mexico, Canada.
Benefit most advanced energy-deficient states - Japan, Korea, Germany, China. Among the countries that received the greatest benefit from the fall in prices will be Ukraine, which will not only significantly reduce energy costs, but also to complete the active phase of military confrontation with Russia, whose economy is mainly dependent on oil prices.
I think oil prices for Brent crude oil in 2015 will be located in the hallway $ 70 ... 80 / bbl. Price threshold for OPEC countries over the long term - $ 70 / barrel. In the short term the price - about $ 50 / bbl. Price threshold will determine the cost of production and social programs producing states, which must be followed to maintain political stability.
Natalia SLOBODYAN, expert at the International Centre for Policy Studies:
Reasons for the fall in oil prices can name a few - a slowdown of economic growth in China, the global decline in production, indicating that the supposedly natural decrease in oil prices. But the Russian factor also can not be excluded. Given that the federal budget of the Russian Federation by 48.5% filled through neftepribyli factor drop in oil prices has become an effective instrument of political and economic containment and adjusting the foreign policy of Russia, for example, in Ukrainian, Syrian and Iranian issues. In this case, the fall in prices of oil can produce a triple effect: promoting economic recovery, mitigation proposals and overpressure blow to Russia (reducing the yield of the federal budget, reduce the cost of the Russian Federation on the militarization of the state).
Falling oil prices profitable primarily to countries such as Russia and Venezuela, where social programs are directly dependent on the level of oil revenues. A role in reducing the cost of oil played analysts and experts, who, appreciating the revolutionary events in Libya, Syria, and civil unrest in Iraq, predicted a large-scale military actions in their territory and, accordingly, the destruction of infrastructure. Oil brokers do not miss the moment to capitalize on this by buying huge quantities of oil. Contrary to expectations, the Arab revolutions have not caused a significant decline or mass destruction terminals. The effect was the opposite - for example, in Iraq immediately earned two centers of exports (previously there was only one - Basra, and also add in Northern Kurdistan).
Importantly, those who benefit from cheap oil. Today, Iran, which is a member of OPEC, an outspoken critic of the organization's policy and opposes the containment of falling prices by limiting production. After 8 September the EU lifted sanctions against the Iranian state chief trader - tanker company NITC, Tehran is actively trying to compensate for lost profits. It is significant that in this respect, Iran is cooperating with China. To maintain economic growth Beijing needs cheap oil Therefore Celestial has declared its readiness to invest in Nefteproekt Iran. Moreover, China has been actively fund Mozambique, Equatorial Guinea, South Sudan, Chad and other countries that produce and export oil, not members of OPEC.
Price threshold for oil at the global level will be adjusted costly production of shale oil in the United States. Therefore, we can assume that the price of oil falls below $ 60. Over the next two years for most producing countries of the Persian Gulf prices remain at $ 75 / bbl., Whereas the Russian Federation is a critical $ 80 for Venezuela - $ 100 / bbl. It is significant that in October the Central Bank of Russia began to develop a set of measures in the event of the fall in prices to $ 60 / bbl.
It should be expected that the drop in oil prices will lead to cheaper energy in Ukraine. Given that they have a significant impact on the cost of manufactured goods, it will increase the profitability of domestic enterprises. You can also expect greater tractability of our north-eastern neighbors when adjusting the gas contracts.
Russia due to a significant reduction in oil revenues will have to reconsider social standards and programs that will lead to discontent and unrest. In this, the political elite of Russia, it is important to create an image of the enemy from the Ukraine, America or European countries who allegedly guilty of worsening the lives of ordinary Russians, and to justify this increase in spending to strengthen the defense industry. It is possible that Russia will expand its destructive foreign policy towards the Baltic States, Ukraine and Moldova, which could lead to a change in the architecture of the geopolitical space.
Roman Storozhev, President of Association "Ukrainian Subsoil Users":
The collapse of oil prices explain the shale boom in the US, due to which there was a sharp growth in the volume of production. Perhaps this is partly due to the effects and mi quench between the US and Russia, as the persistence of low quotations for Russia means not only the loss of revenue, but the rapid decline in ratings.
Collapse in prices complicate the situation in countries that are directly dependent on oil revenues. These states will be forced to revise its budget plans. Many have already done so on the basis of future price $ 60 ... 77 / bbl., Which threatens the reduction of surplus, and even the emergence of budget deficits. At risk are Bahrain, Angola, Libya, Venezuela and Ecuador. But even if prices continue to fall, OPEC countries will maintain the level of investment, hoping to restore the high demand in the future. At the same time, oil producers such countries as Kuwait, UAE and Norway to worry about falling oil prices should not be. They do not have to send large volumes of oil revenues to the needs of the population, given the budgeted low prices, as well as created in recent years, the balance of payments surpluses. Unlike them, he, Russia is likely to be forced to lower production volumes due to falling profitability and sanctions can affect the realization of the raw material.
Price threshold will largely determine the collective decision of OPEC. However, at the November meeting of the cartel members have kept oil production at the level set in 2011. Thus, the decline in prices is likely to continue, and the international community is already preparing for this.
For Ukraine, this situation could have several advantages, because our country is a net importer of energy. In addition, the formula price of imported natural gas from Russia is tied to oil quotations. That is, since the second quarter of 2015, the Russian gas cheaper. In the foreign currency equivalent and decrease the cost of imported petroleum products. Only it is unlikely we will be able to experience a reduction in prices due to the rapid devaluation of the national currency. In the global space it can lead to a reduction in investment in oil production and lead to a redistribution of funds to other projects.
Oleg Shirokov, director of the Ukrainian LPG Association:
Before making any predictions, I want to say that the oil in the history of its production was never sold at a realistic price. Oil has been and probably will be a means of political pressure. The main generator of the collapse of prices is another game, "Who in the world of the main." Who benefits and profitable - is also clear. Who production is the basis of the economy - for those disastrous fall in prices, such as Russia. Advantageous, for example, Ukraine and those at a low price is more or less able to balance its energy market. I do not think that the quotes fall below $ 60 / bbl. - This is the level at which the price can hold the entire 2015 Again, it will depend on political developments. And the fact that we have not seen the end of the "oil era" - that's for sure. It is possible that in 2016 the "black gold" can rise again.
Michael Krutikhin, partner and analyst at consulting company RusEnergy:
Surprises on the November OPEC's decision did not have any. Quota saved. The decision was predictable - the cartel has nothing to do with oil prices. OPEC will not act jointly, each will pull the blanket over himself. This decision is extremely disadvantageous to Iran and Venezuela. Venezuela - because it is their actions brought the industry to the economy and the terrible state. Iran - because of international sanctions he has to feed the population and implement social programs that cheap oil is very difficult. In the plight of Algeria and Nigeria. The easiest way to Qatar and Kuwait. Qatar can safely exist at $ 40 / bbl., Kuwait - for $ 50 ... 60. Yes, and Saudi Arabia, using its reserves, can stretch for quite a while.
Alexander Pasechnik, Head of Research, National Energy Security Fund of Russia:
It is logical to talk about collusion of Saudi Arabia and the United States, which provokes historical moments - the projection of past landslides commodity markets, influenced the collapse of the USSR. But today parallels with regard to Russia, I think, it is not necessary to carry out. Even the Saudis renounced conspiracy version of the game for a fall. They attribute this to their high expectations in terms of budgetary cost of a barrel. But we must understand: Saudi Arabia among OPEC members are most adapted to the low price. In addition, the US dependence on exports is reduced because of the "shale" breakthrough, and the loss of markets for Riyadh is becoming more critical. It is logical to assume that Saudi Arabia decided not to oppose the scenario speculators, the same US investment banks, which are now operating at reduced ... Thus, CA "straighten" their strategy to "acting out" supply the American market - for slate miners had already beaten the New World the alarm due to falling margins. But Saudi Arabia risks are high - social problems due to falling oil prices and fiscal deficit can become catalysts revolutionary scenario in the country.
Speculative pressure due to the prevalence of multiple "paper oil" over its physical volumes can provoke deep tactical hole in the market, but how long to keep the bar extremely low prices global punters can not afford because of the growing confrontation between manufacturers. Speculators is important to know and understand the "bottom" for the return of invested capital. "Bottom" marked JP Morgan - $ 65 / barrel. US Department of Energy says about the script subsidence quotes up to $ 50 ... If we consider that JP Morgan - an important and notable player from a pool of speculators, then $ 65 - about their purpose. The forecast of $ 50, I think, maloobektiven - it does not reflect the degree of influence of OPEC and rising capital intensity of production.
The market response to low prices may not be as straightforward as exporters believe. On the one hand, according to the Norwegian consulting company Rystad Energy, with an average of quotations $ 70 / bbl. will be threatened 30 billion barrels. offshore projects. In turn, Goldman Sachs analysts argue that this price level will make unprofitable production by 2.3 million barrels. per day by 2020. and even 7,5mln - 2025 However, in recent years there have been plenty of evidence of the fact that oil sources samovozobnovlyayutsya 12 ... 15 years. If these assumptions are true, the extraction of "black gold" were not in danger, no matter how cheap it may be (although, of course, this situation is unlikely to accept the exporters).
There is no consensus with regard to shale projects. For example, the head of an owl-of Directors of TMK-IPSCO (US subsidiary of the Russian TMK) Peter Galitzine, mining companies of the United States is no longer needed the break-even price of $ 75 / bbl.: "A large proportion of drillers believe that it could drop even up to $ 42".
Similarly, evaluated and the future of alternative energy. On the one hand, cheap oil is to reduce its competitiveness. On the other - the US government, China, Japan and the EU Member States will support the development of new technologies and limit greenhouse gas emissions, regardless of the level of oil prices because of political considerations. Therefore, according to the International Energy Agency, "green" energy will receive nearly 60% of the $ 5 trillion to be invested until 2025 in new power plants.
According to experts SEC "Psyche", silhouetted at least two shock scenario. The first scenario. Rapid withdrawal of speculative capital from the stock trading at reducing excess demand and offer quite able to lower the price of "black gold" to $ 30 ... 50 / bbl., As it was in the second half of 2008. This development threatens Russia as a significant reduction in export income that it will be forced to cede or West (including Ukraine) in exchange for the restoration of the previous price and the lifting of economic sanctions, or go to the occupation of Donetsk, Lugansk, Zaporozhye and partly Kherson regions (to be able to supply annexed Crimea land) then strengthen the tax burden in the country and dramatically reduce budget expenditures. This, no doubt, lead to new reciprocal sanctions outflow of investment, reduction of Russian energy supplies to the world market and a complete halt deep-sea and East Siberian projects.
Scenario two. If OPEC member countries continue to dump and lowered the price to $ 10 ... 30 / bbl. (And according to Saudi Oil Minister Ali al-Naimi, the cost of production in the UK is less than $ 2 / bbl.), Hulking Russian companies will be forced to shift to the domestic market. This will make it impossible for them to continue to exist in its current form will lead to a change of ownership-ing, and possibly a change of political regime in Russia.
After the elimination of competition in the face of Russian oil companies once again significantly more expensive, as the new owners of the assets will reimburse profits, lost in a period of declining prices. This will take place against the backdrop of supply reduction, which will be the logical culmination of processes to improve energy efficiency, use of renewable and non-conventional sources and commercialization of breakthrough energy technologies.
In general, all as a joke.
We all employees in the department perspective. Just some outlook is not promising ...
"Terminal", № 2 on January 12, 2015