Now Reading:

Russian economy stumbles under oil price pressure


Russian economy stumbles under oil price pressure

Russia accounts for 11 percent of the world’s oil, but oil and gas combined make up a hefty 50 percent of Russia’s budget, so price fluctuations have a massive effect on economic planning.

This year’s price drop has already cost Russia $100 billion in revenues, and that shortfall means its finance ministry said on Thursday it might have to revise the three-year plan for 2015 to 2017, which is based on a barrel at $100.

Analysts are now wondering how far the price can fall, with many expecting a level at $60 to be tested early next year. Failure by OPEC to agree on cuts also meant the rouble fell further against the dollar, and against the euro it is now at an historic low of 60 to the euro for the first time.

While oil companies have been here before and have contingency plans, the value of the rouble affects everyone and ordinary Russians may soon feel even harsher economic effects on their everyday lives.