If the American oil sector is on the verge of extinction as a result of the collapse in energy prices, Russia is more prepared for such a scenario.
About this writes the “Bloomberg” agency.
As previously reported by News Front, the coronavirus pandemic triggered a sharp decline in oil demand, which, combined with an inflated demand, led to a crisis in the energy market. Oil turned out to be unclaimed, and some American companies were even ready to pay extra “buyers”, if only they took out raw materials from overflowing storage facilities.
The American shale sector was on the brink of extinction altogether, as mining was simply unprofitable. During the crisis, at least four large US oil companies went bankrupt.
Although Russia also suffered from the oil crash, it was much more prepared for this crisis. Moreover, it may not even worry about the alarming prospect of a new collapse in prices, Bloomberg writes.
“This is a crisis that Putin can afford to repeat”, – the agency explains.
“To begin with, Moscow already has substantial protection. Russia stores excess oil and gas revenues in the National Welfare Fund when prices are above about $40 a barrel, and the government can use this when prices are below that figure”.
This approach allowed Russia to accumulate the world’s fourth-largest foreign exchange reserves. In addition, the “floating” Russian ruble, as noted by Bloomberg, tends to weaken along with oil prices, which is in the hands of exporters.
The agency believes that such financial reserves could be used to diversify the economy, dependent on hydrocarbon exports. For example, funds could be used to support innovative small businesses that have been severely affected by the pandemic. At the same time, Bloomberg notes that the Russian government prefers to rely on stability, “even if it means toughness”.