[The interesting thing is that while first of the two reports reproduced below tries to make out that Russia is rather significantly, even if not severely, hit by the slump in global oil market, the latter one make an elaborate case that the slump is (at least partly) deliberate and is a part of the "price war with US shale oil producers". What, however, is undisputed is that it is Saudi Arabia which has rather forced the OPEC countries to maintain their current levels of production despite grumblings from within, especially from Venezuela. Two, evidently, the interests of the oil exporting countries are being affected, particularly of those whose costs of production per unit are near the high end of the spectrum - Russia and Iran reportedly belong to this category.]
I/II. http://www.cnbc.com/id/102223303 OPEC decision spells trouble for Russia Holly Ellyatt | @HollyEllyatt Friday, 28 Nov 2014 | 4:44 AM ETCNBC.com The decision by the Organization of Petroleum Exporting Countries (OPEC) to keep production at its current limits in the face of slumping oil prices means trouble for the Russian economy, analysts believe. Despite hopes from members Venezuela, Iran and Iraq that the 12-counrty oil cartel would cut production from its current 30 million barrels a day, the committee, led by Saudi Arabia, sent out the message that it could cope with lower oil prices. Brent crude was hovering near a four-year low early Friday of $72.43 a barrel, while U.S. crude futures tumbled Thursday nearly $6 to $67.75, the lowest since May 2010 after OPEC's decision. Crude prices have fallen around 30 percent since June on the back of an abundant supply and lack of demand. As such, there was hope that OPEC might support prices by cutting production but these were dashed on Thursday. Read MoreOPEC needs to 'wake up' to shale revolution Along with the currencies of other oil producing nations, such as Norway and Canada, the Russian ruble fell further after the OPEC decision was announced. On Friday, it was trading at 49.14 against the greenback, having dipped from 47.39 against the greenback ahead of the OPEC decision on Wednesday. Russian stocks also dropped on the news but the country's MICEX index had recovered to trade slightly higher Friday morning at 1,533. Read MorePutin seeks to reassure world amid 'perfect storm' The Russian stock market has seen wild swings this year and the country's currency has fallen 45 percent against the dollar year-to-date due to global concerns over Russia's alleged incursions into Ukraine and the fall in the oil price. Russia holds among the world's largest resources of gas, oil and coal, according to the International Energy Agency - and relies heavily on its energy exports. With the oil price falling further on the OPEC decision, Russia's economy bear the brunt of the decision, analysts told CNBC. "(The OPEC decision is) very bad news for Russia and the ruble - just makes a difficult decision that much more difficult," Timothy Ash , head of emerging market research at Standard Bank, told CNBC in an email Friday. Read MoreRussians dumping rubles for... Rolls Royces? Meanwhile Naeem Aslam, chief market analyst at Ava Trade said in an email to CNBC Friday that lower oil prices will drive the income of oil-producing firms lower "which could increase the pressure on Mr Putin and on his economy". Russia between a rock and a hard place Russia might be able to cut production, but that will come at a price to Russia's economy. On Thursday, Russia's finance ministry said the country's budget policy should be adapted to low oil prices which could last for a long time, RIA news agency said, cited by Reuters. A weaker ruble in Russia on the back of sanctions imposed on the country after its incursions into Ukraine has not helped rampant inflation miring the domestic economy. The economy ministry believes inflation will hit 9 percent before the year is out. The country's central bank has increased interest rates in a bid to curtail spending and bring the inflation rate down. But growth is falling as economic outlook worsens. Russian gross domestic product expanded just 0.7 percent year-on-year in the third quarter. The Russian Central Bank has lowered its 2014 growth forecast to 0.3 percent and now forecasts no growth in 2015, down from a forecast of between 0.9 and 1.1 percent growth forecast in September. Read MoreWhy is Putin buying gold? The falling oil price might not be all bad, however, according to Ava Trade's Aslam. Falling oil prices mean lower inflation -- something Russia could do with -- as the cost of producing goods becomes cheaper. As such, Russian producers could be given a boost but for oil companies it's a different matter. "Lower inflation is good for producing goods especially now (in the short term) however, as far as it goes for the drilling companies, it is a disaster," Aslam said. The Kremlin has major stakes in some of Russia's biggest oil companies, among whom are Rosneft, Lukoil, Yukos, Gazprom, TNK-BP and Surgutneftegaz, which were trading mixed on Friday but the OPEC decision could spell "disaster" for them - and for the government. Pressure on Putin With attempts to buoy Russia's economy set to get harder, Russian President Vladimir Putin could face growing disillusionment among the Russian populace, analysts also believed. John Kilduff, the founding partner of Again Capital, told CNBC in an email Thursday that the decision could put pressure on Putin's regime. "The (decision) could spell political trouble for Russia, including a threat to Putin," Kilduff said. "(CNBC presenter) Steve Liesman joked to me that they can (afford) $60 oil, but the regime won't be able to afford to stay in power," Kilduff noted. If oil prices remain near or below current levels then the Russian government may well have to make some difficult decisions to help balance the books and try to keep its economy on an even keel, Michael Hewson, chief markets analyst at CMC Markets, told CNBC Friday. "President Putin may be popular now but if the rise in inflation pressures starts to adversely affect the Russian public for a lengthy period of time it could well cause the Russian government some problems further down the line." - By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. II. http://www.vox.com/2014/11/28/7302827/oil-prices-opec Oil prices keep plummeting as OPEC starts a price war with the US Updated by Brad Plumer on November 28, 2014, 2:14 p.m. ET @bradplumer [email protected] Tweet (895) Share (15k) +1 LinkedIn (399) Email Print An oil rig south of town extracts crude on July 21, 2008 in Taft, California. David McNew/Getty Images Follow Vox! By signing up, you agree to our terms. Oil prices have been dropping sharply over the past three months -- a huge energy story with major repercussions for dozens of countries, from the United States to Russia to Iran. "OPEC is now engaged in a price war with US shale oil producers" But on Friday, prices went into serious free-fall. The reason? OPEC -- a cartel of oil producers that includes Saudi Arabia, Iran, Iraq, and Venezuela -- had a big meeting in Vienna on November 27. Before the gathering, there was speculation that OPEC countries might cut back on their own oil production in order to prop up prices. But in the end, the cartel couldn't agree on how to respond and did nothing. Oil prices promptly nosedived, with the price of Brent crude now hovering around $70 per barrel: (<a href="http://www.nasdaq.com/markets/crude-oil-brent.aspx?timeframe=10y";>NASDAQ</a>) (NASDAQ) This marks a big shift in global oil politics. Essentially, OPEC is now engaged in a price war with oil producers in the United States. The cartel will let prices keep falling in the hopes that many of the newest drilling projects in the US will prove unprofitable and shut down. This is a risky stand-off for OPEC, as many of its member countries require high oil prices to balance their budgets. Iran, for one, is facing a real pinch. It's also a sign that OPEC's influence over global oil markets may be waning. Below is a basic overview of how we got to this point -- and what this oil price war means for the rest of the world. Why oil prices have been plummeting in 2014 Photo taken August 21, 2013 shows a pumpjack (also known as a Nodding Donkey) near Tioga, North Dakota. (Karen Bleier/AFP/Getty Images) Photo taken August 21, 2013 shows a pumpjack (also known as a Nodding Donkey) near Tioga, North Dakota. (Karen Bleier/AFP/Getty Images) To understand this story, we have to go back to the mid-2000s. Oil prices were rising sharply because global demand was surging -- especially in China -- and there wasn't enough oil production to keep up. That led to large price spikes, and oil hovered around $100 per barrel between 2011 and 2014. But as oil prices increased, many energy companies suddenly found it profitable to start extracting oil from difficult-to-drill places. In the United States, companies began using techniques like fracking and horizontal drilling to extract oil from shale formations in North Dakota and Texas. That led to a boom in "tight oil" production, as the US has added about 4 million new barrels of crude oil per day to the global market since 2008. (Global production is about 75 million barrels per day, so this is a significant number.) (Energy Information Administration) (Energy Information Administration) Up until very recently, however, that US oil boom -- along with increases in Canada and Russia -- had a fairly minimal effect on global prices. That's because, at the exact same time, geopolitical conflicts were flaring up in key oil regions. There was a civil war in Libya. Iraq was a mess. The US and Europe slapped oil sanctions on Iran and pinched that country's exports. Those conflicts took more than 3 million barrels per day off the market. Things changed again around September 2014. Many of those disruptions started easing. Libya's oil industry began pumping out lots of crude again. And even more significantly, oil demand in Asia and Europe has been weakening -- particularly in places like China, Japan, and Germany. The combination of weaker demand and rising supply caused oil prices to start dropping from their June peak of $115 per barrel down to around $80 per barrel by mid-November. Oil is still much pricier than it was a decade ago (when it was still around $40 per barrel). But it's dropping for now. OPEC's surprising response: Let prices keep falling (Alexander Klein/AFP/Getty Images) (Alexander Klein/AFP/Getty Images) That brings us to OPEC, which still produces 40 percent of the world's oil. For decades, this cartel has often tried to influence the price of oil by coordinating either to cut back or boost production. At its big meeting in Vienna on November 27, there was a lot of heated debate among OPEC members about how best to respond to this current drop in oil prices. Some countries, like Venezuela and Iran, wanted the cartel (mainly Saudi Arabia) to cut back on production in order to prop up the price of oil. The reason is that these countries need high prices in order to "break even" on their budgets and pay for all the government spending they've racked up: OPEC breakeven prices OPEC "break-even" prices in 2012. (Matthew Hulbert/European Energy Review) On the other side of the debate was Saudi Arabia, the world's largest oil producer, which was opposed to cutting production and willing to let prices keep dropping. For one, officials in Saudi Arabia remember what happened in the 1980s, when prices fell and the country tried to cut back on production to prop them up. The result was that prices kept declining anyway and Saudi Arabia simply lost market share. What's more, the Saudis have signalled that they can live with lower prices around $80 per barrel in the short term. (The government has built up massive foreign-exchange reserves to finance deficits.) "Saudi Arabia was in favor of letting prices continue to fall" In the end, OPEC couldn't quite agree on a response and ended up keeping production unchanged. "We will produce 30 million barrels a day for the next 6 months, and we will watch to see how the market behaves," said OPEC Secretary-General Abdalla El-Badri after the meeting. For all intents and purposes, OPEC is now engaged in a "price war" with the United States. What that means is that it's very cheap to pump oil out of places like Saudi Arabia and Kuwait. But it's more expensive to extract oil from shale formations in places like Texas and North Dakota. So as the price of oil keeps falling, some US producers may become unprofitable and go out of business. The result? Oil prices will stabilize and OPEC maintains its market share. The catch is that no one quite knows how low prices need to go to curb the US shale boom. According to the International Energy Agency, about 4 percent of US shale projects need a price higher than $80 per barrel to stay afloat. But many projects in North Dakota's Bakken formation are profitable so long as prices are above $42 per barrel. We're about to find out how this all shakes out -- and which numbers are correct. What's especially interesting here is that Saudi Arabia and OPEC appear to be ceding their long-standing role in modulating the global supply of oil. Instead, they'll leave that up to the markets. How falling oil prices could affect Russia, Iran, and the US Vladimir Putin has his work cut out for him. (Maxim Shipenkov/AFP/Getty Images) Vladimir Putin has his work cut out for him. (Maxim Shipenkov/AFP/Getty Images) A plunge in oil prices could have significant economic consequences around the world. A few examples: Russia: Russia's situation is getting most of the attention these days. The country was already suffering from weak growth -- on pace to expand just 0.4 percent in 2014. Part of that was due to the ongoing Ukrainian crisis and Western sanctions. "Russia had been planning for $100-per-barrel oil in its 2015 budget" But the plunge in global oil prices is likely to put even further strain on the nation's economy. Oil revenues account for roughly 45 percent of Russia's budget, and the government's spending plans for 2015 had assumed that prices would stay in the $100-per-barrel range. If oil continues to stay well below that, Russia will either have to draw down its $74 billion foreign-exchange reserves or cut back on planned spending. Iran: Iran's economy had recently started to rebound after years of recession. The International Monetary Fund had been projecting that the country was on track to grow 1.5 percent this year and 2.3 percent next year. But that was all before oil prices started to drop -- a potentially precarious situation for the country. One big problem for Iran is that it also needs oil prices well north of $100 per barrel to balance its budget, especially since Western sanctions have made it much harder to export crude. If oil prices keep falling, the Iranian government may need to make up revenues elsewhere -- say, by paring back domestic fuel subsidies (always an unpopular move, at least in the short term). The United States: In the US, meanwhile, a fall in crude prices would have more varied impacts. For many people, it will offer a nice economic boost: cheaper oil means lower gasoline prices, giving households more money to spend on other things. On the other hand, oil-producing states like Texas and North Dakota are likely to see a drop in revenues and economic activity. (For more, see: "Which states get hurt most by falling oil prices?") The price drop could also spur people to start using more oil. Case in point: In recent years, high gasoline prices have spurred many Americans to buy smaller, more efficient cars. But if gasoline prices fall, bigger cars and SUVs could make a comeback. (Overall US fuel economy will still keep rising over time -- because the federal government has imposed new standards on cars and light trucks through 2025. But this might now happen more slowly.) In the Financial Times, energy expert Michael Levi has a piece on how the US (and other countries) could take advantage of low oil prices to make needed energy-policy reforms -- such as ending wasteful fossil-fuel subsidies or putting in place new efficiency measures -- in order to prepare for the day when prices inevitably rise again. But that's hardly guaranteed to happen: Many policymakers might just decide low oil prices are here to stay and use it as an excuse to cut back on efficiency measures or energy alternatives. Further reading -- The price of oil is falling right now, but it's not hard to imagine scenarios in which it starts rising again. As energy economist James Hamilton points out, instability in Libya, Iraq, or Nigeria could do it. And, of course, if Canadian and US oil producers pull back sharply in response to lower prices, those prices will eventually stabilize and rebound. -- This piece by Reuters' Alex Lawler, Amena Bakr, and Dmitry Zhdannikov has some excellent reporting on the internal debates within OPEC during Thursday's meeting. -- How the oil and gas boom is changing America. -- 9 questions about the Keystone XL pipeline you were too embarrassed to ask. -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send an email to [email protected]. 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