Declining oil prices bite some more than others. And some of that pain has hit Venezuela.
The price of Venezuela’s benchmark basket of crude and petroleum products fell on Aug. 22 to
$90.89, a two-year low. Since the end of last month, the price has
fallen 10 percent, tracking a surprising drop in international prices in
spite of Mideast tensions.
For Venezuela, each $1 drop in the
per-barrel price translates into a $1 billion loss of government
revenue. With a fiscal deficit already estimated at 14 percent to 15
percent of GDP, the fall in prices alarms many, especially as domestic
oil production continues to slide.
Russia and Iran are also affected by weak energy prices.
"The Russians are very exposed to lower oil prices. We don't know to what extent it will influence their behavior in Ukraine, but they're certainly going to feel pressure on their budget."
Russia's ruble currency has already fallen to a historic low against the dollar as its economyis hit by sanctions from the United States and European Union over its involvement inUkraine. That increases the price Russians must pay for many imports, from vegetables to luxury goods.
Iran on the other hand was trying to get its oil back on international markets after years of being under U.S. led sanctions over concerns about nuclear proliferation. Now with the so-called U.S. oil gut those negotiations might well be delayed since the U.S. appears to be in a stronger position.
Yet in a recent interview with the Financial Times, former BP chief Tony Hayward noted:
US and EU sanctions against Moscow are in danger of turning around and biting the west by constraining global oil supply and pushing up prices incoming years...cutting off capital markets from Russia's energy group, which would eventually lead to less investment in Russian oil production, was likely to damage long term supply.
He said the US shale boom had obscured the growing risks to the world's supply, but its effects would wear off, leaving the global economy dangerously exposed to potential disruptions in th flow of oil.
Hayward may be unpopular owing to his BP gulf oil spill connection, but that should not color one's view that he doesn't have some idea about energy's future.
Just today in the Financial Times as reported in Business Week Blackstone the big investment group announced it's pulling out of Russia.
Blackstone Group LP (BX:US) is
backing off efforts to find deals in Russia, the Financial Times
reported, citing an unidentified person with knowledge of the matter.
The
world’s biggest manager of alternative assets isn’t renewing contracts
with consultants it employs in the country, according to the newspaper.
Tensions between Russia and nations including the U.S. escalated this
year, leading to sanctions, as Russian President Vladimir Putin annexed
the Crimean peninsula and supported rebels seeking to split eastern
Ukraine.
Blackstone
Chairman Steve Schwarzman joined the international advisory board of
the Kremlin-backed Russian Direct Investment Fund three years ago. The
$10 billion fund was created to stimulate investments in privately held
businesses and wean the state off its dependence on commodities. Its
investment partnerships have helped draw foreign capital into Russia’s
economy, according to its website.
Blackstone’s
decision also was prompted by its struggle to find any suitable
investment opportunities in the past three years, the FT said. Peter
Rose, a spokesman for New York-based Blackstone, declined in an e-mail
to comment on the report.
Blackstone
oversees $279 billion in assets including private-equity, real estate,
credit and hedge-fund investments. Schwarzman said in April that
investors should wait to gauge the results of international sanctions
against Russia before making investment decisions.
“It’s
in the ‘watch and wait’ category,” he said in an interview with
Bloomberg Television on April 28. “This can have a variety of outcomes.”
There's much more here than meets the MSM's mundane coverage. When it comes to future supply disruptions, much of it falls under the be-careful-what-you-wish-for label.
t. man hatter
