NEW – January 17, 2023
The Ministry of Finance has disseminated information that the average price for domestic Urals was $46.82 per barrel from December 15 to January 14. Given that the budget for 2023 was made up based on an average price of $70, such dynamics threatens to seriously increase the gap between income and expenses (by 1-1.5 trillion rubles). The Ministry of Finance has already planned it in the amount of 2.9 trillion rubles. However, much more revealing figures were not mentioned — in January — November 2022, the price averaged $78.2 per barrel.
A number of foreign and domestic liberal monetarists predict a decline in oil prices, including from the financial and economic bloc, to the corridor of $45-50 per barrel of Urals; Given that the cost of oil production at new fields in Russia ranges from $15-25, such a decrease means that the Russian budget will face the most serious problems.
However, these predictions do not take into account two global trends that will determine the increase in the cost of oil and, regardless of Western restrictions, will preserve and increase export revenues of the Russian Federation in 2023.
First. China is overcoming the pandemic recession and entering the trajectory of outstripping economic growth. Today, China assumes the GDP growth rate in 2023 at 4.5%, but judging by the scope of external purchases of raw materials and energy resources, this figure will be at least 5.5%. The situation is similar in India, whose authorities and businesses see a chance to increase production and income, given the recession in the OECD countries, as well as the growth of production and the transition to new ways in Southeast Asia and Latin America. The demand for oil under the influence of these factors will increase by 5-8%, respectively, supporting quotations on the Urals in 75-80 and more dollars.
Second. The United States and NATO countries have supplied weapons to Ukraine in the amount of about $100 billion, no less costs by analogy are coming in 2023. The emptied arsenals must be replenished by increasing the supply of weapons in physical terms. Updating and replenishing weapons will inevitably require increased energy costs for production, logistics, etc. Therefore, at least 60 billion dollars of increased demand will be presented to the market. At the same time, the price ceiling or other blockages on Russian hydrocarbons are easily bypassed through a system of reimbursement or re-export, which the West cannot stop for a simple reason – it will not be able to provide itself with its own energy reserves, having refused supplies from third countries.
The declared expectations that oil prices will fall are spread as part of “verbal interventions” in the interests of international speculative groups that successfully operate on the Russian stock exchange. For the Ministry of Finance of the Russian Federation, such forecasts provide arguments to increase domestic borrowing under the pretext of preemptively preventing the aggravation of the budget deficit. The federal loan bond system allows to receive money at a high interest rate painlessly and out of connection with the growth of commodity production, providing intermediary income to a number of banks and increasing the cost of servicing the state debt to a level (2.5 trillion rubles) comparable to the budget deficit.
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