Sinking oil prices put the pressure on Putin’s Petrostate
May 20, 2010Russia’s budget reportedly relies on an international oil price of $95 per barrel in order to remain balanced. At $70 a barrel, it is 4% in deficit. At $50 a barrel, it drops to 8% deficit. Oil took a steep drop today to below $65 at one point. Although it has now recovered to $67.75 per barrel, that still represents an almost 3% drop from yesterday.
Russia has long showed a willingness to use its “energy weapon.” But that is a weapon that can easily be turned back on them. If the US fully develops its non-conventional oil and gas resources (see, for example, here and here), it will exert a long term downward pressure on oil prices globally.
It is a matter of will. The United States has the resources to once again dominate the world energy market. It need only find the wherewithal to utilize them.
To learn more about Gazprom and why they perceive shale gas as an imminent threat, visit http://www.naturalgasforeurope.com
[...] and a concerted European approach could take some of the potency out of Russia’s “energy weapon.” The timing, however, is unfortunate. Statism in general and the EU’s particular [...]