Russia: From oil curse to sanctions

[GennGreymane]

http://www.aljazeera.com/programmes/...125112124.html

Oil is often seen as a curse for energy producers and this has certainly been the case for Russia - 70 percent of its exports are oil and gas.
But things could be changing, as Western sanctions designed to punish Moscow over the conflict in Ukraine seem to backfire. It appears Russia's economy could recover from hitting rock bottom. Many local industries are picking up the slack from international companies.
The country was importing around $900bn worth of food from approximately 6,000 European companies before the Russian government banned food imports from the EU and US in August in retaliation for Western sanctions imposed on Russia following its annexation of the Crimea.
The country's agricultural sector suffered years of underinvestment and President Vladimir Putin says the food embargo is Russia's chance to become more self-sufficient.

In December last year the Russian currency was tanking. In an attempt to stop money flooding out of the country, interest rates rose to 16 percent, and more than $100bn were spent propping up the rouble.
Inflation, currently at about 16 percent, is likely to fall to 12 percent this year according to the International Monetary Fund (IMF). And while the economy is going to contract 3.4 percent this year, 2016 should see a small upturn with 0.2 percent growth.
But the money in people's pockets nowadays is going a lot less far than it used to be, mainly because of sanctions imposed on the country and the falling oil price.

So what are the challenges facing Russia? How are sanctions affecting Russia's economy and ordinary Russians? And can the Kremlin steer Russia away from economic crisis in 2015?

Charles Stratford reports from Moscow. And Oleg Kouzmin, an economist and vice-president of Renaissance Capital, talks to Counting the Cost about sanctions and the future of Russia's economy.

South Africa: What has gone wrong?
The World Economic Forum, a meeting place for presidents, chief executives and NGOs descended in Cape Town.
The end of apartheid more than 20 years ago was a momentous achievement for South Africa; the establishment of democracy equally so, but economic gains have proved to be a tougher challenge.

South Africa became the fifth member of the BRICS nations in 2010, joining Brazil, Russia, India and China. It is currenly the second biggest economy in Africa.

According to numbers from the IMF, the picture does not look too bad but growth averaged just 1.3 percent between 1995 and 2008. And that has pretty much lagged behind world growth over the last 20 years. But the jobless rate has actually risen, and currently stands at 25 percent.
So what has gone wrong? Why has the country not made progress on cutting jobs?
Hendrik du Toit, the chief executive of Investec Asset Management, joins the programme.
Qatar's migrant workers
Qatar has taken a lot of flak for its treatment of foreign workers, but that has not stopped them from coming.

Overseas workers, mainly from Asia, send back billions in remittances to their families back home. Pakistan, for example, received $13.3bn in the first three-quarters of its 2014-2015 financial year.
Raja Ashfaq Sarwar, Pakistan's minister for labour and manpower, spoke to Osama bin Javaid. He explained why Pakistan wants to send 150,000 people to work in Qatar.

Venezuela's oil dependency
As an oil-based economy, Venezuela has long enjoyed the benefits of high prices for this essential global commodity. But oil prices have taken quite a tumble since last year.

Now Venezuelans are looking at the prospect of things staying that way for the forseeable future.

Virginia Lopez asks just how low would be too low for Venezuela's oil-dependent economy.

[I Push Buttons]

In other news, having an economy entirely based on one thing and one thing alone doesn't turn out so well when that one thing rapidly drops in price; and invading your sovereign neighbors does little to help the situation. More at 11.

[Independent voter]

I wonder if oil ever will be the cash cow it once was? There's a lot of alternative energy sources like solar on the horizon that could provide electricity for things like autos. Wouldn't that be amazing if oil never rose above $100 a barrel again?

[Acidbaron]

Oil will increase in value again as we still need it to produce quite a large amount of our daily used goods, such as plastic and creating roads.

[Kellhound]

Oil will increase in value again as we still need it to produce quite a large amount of our daily used goods, such as plastic and creating roads.

OPEC seems to be hoping to get it back to $80, but that will allow the US fracking to be profitable again.

[Elegiac]

Oil will increase in value again as we still need it to produce quite a large amount of our daily used goods, such as plastic and creating roads.

Our domestic reserves are sufficient for both of these. Even then, there are other alternatives.

[MMKing]

Part of the problem is Russias dependency on oil and gas. A much much more important problem is their foreign police. Europe is in no way shape or form willing to maintain the status qua of buying all their energy from Russia. Had Russia been a more friendly trading partner, the political press to reshape the energy situation would not be as important.

I don't see the oil price ever going above 100$, and i doubt it will go to 80$ a barrel.

[Reeve]

OPEC seems to be hoping to get it back to $80, but that will allow the US fracking to be profitable again.

American Shale is already profitable again. Not very profitable, but it can make money at the current prices. Not so much a few months back when oil was nearly $20 cheaper, but the price has come back up to "barely making money" levels for US fracking (on average. some areas are more profitable, some less).

[Nadiru]

Oil will increase in value again as we still need it to produce quite a large amount of our daily used goods, such as plastic and creating roads.

Oil demand for plastic and the creation of certain chemicals and solvents don't even represent 20% of US demand. If the US no longer needed gasoline to run transportation, US oil consumption would drop by 50% overnight. Which means that any gains in US automobile fuel efficiency has a pretty significant effect on US oil consumption, and the US is still on the metaphorical beaten path as far as fuel efficiency is concerned; the US has had cars at least this efficient before.

http://www.eia.gov/tools/faqs/faq.cfm?id=41&t=6

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American Shale is already profitable again. Not very profitable, but it can make money at the current prices. Not so much a few months back when oil was nearly $20 cheaper, but the price has come back up to "barely making money" levels for US fracking (on average. some areas are more profitable, some less).

Shale isn't just profitable from the function of oil prices going back up, either. American oil firms, for all their faults, are really good at extracting energy from the ground cheaply and efficiently. As time has passed, rig prices have gone down significantly, rig construction time has gone down significantly, and net extraction (which is tantamount to net profitability) per rig has gone up significantly.

[agugxidona]

There's a lot of alternative energy sources like solar on the horizon that could provide electricity for things like autos.

[Deleted]

If only Putin hadn't invaded Ukraine to prove to the world that Russia can still get it up and it's not irrelevant in the global politics. Eat it, Russians!

[Masark]

Oil will increase in value again as we still need it to produce quite a large amount of our daily used goods, such as plastic and creating roads.

Not really. Very little oil goes to non-fuel uses.

Certainly, but fuels are the very overwhelming majority of what oil is used for. Of the 16.4 million barrels of crude refined per day in the USA, a clear majority (8.8 million barrels) becomes road gasoline (another 12k becomes aviation gasoline). Another 1.4 million becomes jet fuel, 3.8 million becomes diesel, and 319k becomes heating oil.

Roughly 1.2 million barrels of that go to non-fuel end products, including coke, asphalt, feedstocks, waxes, lubricants, etc. That's a bit more than 7%.

http://www.eia.gov/dnav/pet/pet_cons...s_mbblpd_a.htm

If we start using a different source of energy to move our planes, trains, and automobiles, oil extraction is going to be massively curtailed.

[Trassk]

Silly Putin, if he spent more time trying to build bridges instead of looking at memes about himself from internet trolls, maybe he'd not be in such a sticky wicket.

[Shalcker]

Obviously a sign of strong Russia! Any contraction is investment opportunity for inevitable rebound!

[Reeve]

Shale isn't just profitable from the function of oil prices going back up, either. American oil firms, for all their faults, are really good at extracting energy from the ground cheaply and efficiently. As time has passed, rig prices have gone down significantly, rig construction time has gone down significantly, and net extraction (which is tantamount to net profitability) per rig has gone up significantly.

The oil companies have also used this oil price drop as a reason to squeeze the crap out of their suppliers and contractors. Where before you might have gotten 15-20% project margin (which is barely enough to keep the doors open in an intermittent industry with high idle costs), now you expect more like 9-12%. In the short term, you can make that happen by laying off a ton of workers, maybe selling a bunch of equipment at a loss just to get the depreciation off the books, but in the long term it's not sustainable.

[Kallisto]

If only Putin hadn't invaded Ukraine to prove to the world that Russia can still get it up and it's not irrelevant in the global politics. Eat it, Russians!

Problem is anyone who thinks the US wouldn't do the same is deluding themselves (If similar thin happened in Mexico). It is the geopolitical game that you have to play. Not only that but Ukraine had an agreement that all sides signed (EU,US,Ukraine,Russia) in which withing 24 hours the opposition at the time tore up and rushed parliament. Now being rewarded for it.