The Russian authorities fear that oil prices will soon fall, which will deprive the Russian Federation of a significant part of its income. The Central Bank of Russia has prepared a report in which it warned about the risk of a repeat of the situation of the mid-80s of the last century, when oil prices fell, which was one of the reasons for the collapse of the USSR. "Apostrophe" examined how realistic such a scenario is, and whether Putin's Russia will go to the garbage dump of history after the Soviet Union.
Russia is seriously concerned about world oil prices. Which is not surprising, because oil revenues provide about a third of all revenues to the Russian budget, and because oil prices are lower, the aggressor countries have less money.
According to Reuters, the Central Bank of Russia has prepared a presentation for the Russian government, which states that the United States, the Organization of the Petroleum Exporting Countries (OPEC), as well as other oil-producing countries, are capable of flooding the global market with oil, which will lead to a collapse in oil prices.
Production will increase
OPEC, whose unspoken leader is Saudi Arabia, currently unites 12 countries, which account for more than a third of all world oil production and half of its exports. OPEC member countries coordinate oil production volumes by setting quotas for each of the countries in order to limit the supply of raw materials on the world market and prevent prices from falling too much.
Recently, Russia, which is one of the largest oil producers and exporters in the world, as well as about a dozen other countries (the so-called OPEC+ format), has been coordinating its actions with OPEC.
The quotas do not apply to countries outside OPEC+, including the United States, which, along with Saudi Arabia and Russia, is the largest producer of crude oil.
The American oil industry works mainly for its domestic market, but increased production in the United States can affect the total supply of oil on the world market, and therefore its price.
Experts and industry insiders predicted a drop in oil prices in 2025 due to the implementation of Donald Trump's announced policy as US President, who intends to stimulate domestic oil production (Drill, baby, drill! - "Drill, baby, drill!")
In addition, it is known that OPEC+ members intend to start increasing production from April 1. It is possible that countries that are not part of the cartel will also decide to increase production volumes so as not to lose their share in the global market.
Fighting expensive oil
Thus, oil prices may indeed sink.
In fact, they have already fallen. While prices were above $80 per barrel at the beginning of the year, they fell to $70 per barrel in March.
True, in recent days, quotes have risen slightly - as of March 28, the price of the benchmark Brent brand was $73.9/barrel, WTI - $69.8 per barrel. But this is more likely the result of the confusion of the market, which does not "understand" Donald Trump's actions in the economy, and in politics as well.
But even before OPEC countries and other participants in the global oil market increase production, supply on the market already exceeds demand. That is, a price adjustment is necessary.
According to Gennady Ryabtsev, head of special projects at the Psyche scientific and technical center, the market situation will depend mainly on OPEC. The expert explained that due to production restrictions for a long time, the cartel countries began to lose their share in the market.
"Now there will be a fight for the market, because OPEC is being pushed out of the market ," Ryabtsev tells Apostrophe. " For them, maintaining high prices means supporting their competitors. Therefore, OPEC countries will increase production, lower prices, and push expensive oil out of the market."
According to him, in most OPEC countries, the cost of oil production is quite low, so low market prices are not a problem for them.
The US is more complicated in this sense. Not long ago, the cost of American shale oil reached $50 per barrel. However, in recent years it has been constantly decreasing and today averages about $35, and in some cases even $20 per barrel.
Things are even worse in Russia. It is believed that the cost of extracting Russian oil is $35 per barrel, but this applies more to old fields, which are already mostly exhausted. As for new fields, the cost there can be as much as $45 per barrel.
Time of low prices
The decline in oil prices and, as a result, petroleum products will become an incentive to increase their consumption - that is, driving a car with an internal combustion engine will again be cheaper than driving an electric car.
However, it is quite possible that an increase in fuel consumption will not occur.
And the reason for that is the same Donald Trump.
"A scenario in which Trump is now starting various "wars" with Europe, Canada, Mexico, and China will definitely lead to a significant slowdown in the growth rate of the global economy, a decrease in oil consumption, and this will lead to a drop in oil prices," Ilya Neskhodovsky, head of the analytical department of the ANTS network, said in a comment to the publication.
In other words, no matter what, oil prices are bound to fall.
And this, as noted at the very beginning, is very worrying for the Russian ruling elite.
However, Russia will only really feel the impact of falling oil prices if they remain low for a long time.
How long can such a period last? Gennady Ryabtsev believes that OPEC will need about a year to push expensive oil out of the market. This, of course, is not enough for the aggressor country to experience an acute shortage of funds that it receives from oil exports.
Ilya Neskhodovsky, in turn, believes that Donald Trump will continue his trade war policy throughout his current presidential term, and therefore the period of low oil prices may well drag on for four years. This is also not very much, but still better.
Back to the Future
The above-mentioned presentation by the Central Bank of the Russian Federation states that the current situation on the oil market is reminiscent of the events of the mid-1980s, when oil prices collapsed (in 1986 they fell below $10 per barrel, which in today's prices, taking into account inflation, may correspond to $25-30 - "Apostrophe").
There are other analogies between today and what happened shortly before the collapse of the USSR – the war of aggression and the arms race imposed on the Soviet Union by US President Ronald Reagan's Star Wars program.
"In principle, Russia is following the same path ," says Ilya Neskhodovsky. " The only problem is that (in Russia) there are no republics that could start a centrifugal movement, so as far as the collapse of Russia is concerned, I highly doubt it. They will have major socio-economic problems, perhaps a political struggle, perhaps even something like the "GKChP" (a group of high-ranking officials of the USSR who in August 1991 tried to prevent the future collapse of the Soviet Union through a coup d'état - "Apostrophe"), but the collapse of Russia, I think, we cannot wait for now."
The expert also believes that even despite all these problems, Russia will be able to continue the war against Ukraine: " The economy will not lead to defeat (Russia). We hope for this, but I see the potential for transforming the Russian economy, Russian society into a large concentration camp. And the USSR at one time rose at the expense of concentration camps."
However, let us add that it will be very difficult for an aggressor country to wage war with the same intensity, unless Donald Trump and his young team come to its aid.