If cheap oil holds in price for at least a year - everybody will suffer from it

12 february 2015 | Argumenty i Fakty

The chief adviser to the Head of the Analytical Center Leonid Grigoriev reported on anti-crisis plan, oil prices, sanctions and difficulties we are going to face in conversation with the correspondent of the AIF newspaper.

Leonid Grigoryev
Leonid Grigoryev
Chief Adviser to Head of the Analytical Center

- Leonid Markovich, will the increase in oil prices rescue us once again, as in 2009?

Leonid Grigoriev: The oil prices decrease quickly, but they need about a year to be restored. How was it actually during the previous crisis? In August, 2008 oil used to cost about $130 per barrel, in October the price fell lower than $40. Representatives of OPEC gathered immediately, and over the October – December, 2008 the oil production volume was reduced by 3 million barrels a day. By the summer prices scored an advance...

Now the price fell twice for half a year. The oil consumption in 2014 made 92 million barrels a day, and oil production - 92,7. It was those 0,7 million barrels a day which dropped the price twice! In 2008 oil production was reduced by 3 million barrels a day, now it is necessary to reduce only by 1 million! It is less than 1% of the world supply.

- Why is it actually not reduced?

- First of all, nobody wants to lose a share of the market. Secondly, somewhere, including our country, reduction of oil production has technological restrictions - having reduced production, you can't boost it in quick time. Only four key Arab countries can do it promptly, but they don't want "to cut off" barrel sharply avoiding troubles with the West countries to which low price is profitable.

However, in March politics can push oil up - the OPEC is under the strongest pressure of internal problems and of seriously affected export countries. There are countries where expenses were put at the rate on oil cost over $100 per barrel, these are Nigeria and Indonesia. In our budget - proceeding from the price about $100, and at saudit and members of OPEC - on average from $80. And now $60 is already a very good price.

But if cheap oil holds in price for at least a year - everybody will suffer from it.

- Everybody will suffer, and especially it will concern us. Sanctions become more rigorous indeed...

- As things stand now, we work with existing restrictions. And there are technological and financial sanctions which were imposed because of falling of Malaysian "Boeing", and moreover, metaphorically speaking, they were imposed quicker, than "Boeing" fell. Talks on new toughening is connected, probably, with the fact that a situation in the Donbas wasn't expected. A defeat of the Ukrainian army is taking place there.

Cheap money, as it was earlier, is now inaccessible to us. The companies in 2015 should give much, and it won't be possible to borrow once again as cheap as it was. It will be difficult to receive investments. But the severest sanctions are not financial, the worst is restriction of technologies import. And here is the rule: if you can't buy - do it yourself. I don't think we aren't able to do it if our weapon is the best in the world. Why we can make a battle-plane, but a set of the major civil development was failed?! In the field of technologies import substitution is necessary regardless of the fact, whether sanctions will be called off or not.

- They say that the economy has no capacities for breakthrough.

- It is not true. We have about 1,5 million security guards. It is even ridiculous: "The economy depleted its potential!" And on each watch the healthy man sits and does nothing! We have plenty of people and resources! The problem is they are keeping hands in pockets. And financial means leave on cottages instead of roads, and it is necessary to invest in education, science and increase of efficiency of the economy.

- Still they say that the anti-crisis plan assumes money flooding of problem knots, but nobody is able to master these means. Won't this one trillion 300 billion rubles be gone?

- I don't comment on financial part. I will tell only that the plan is provided to use reserves for optimization of the prices. In general, large decrease in consumption shouldn't exist, but nobody waits that the situation will be corrected quickly.

- How long will the crisis last and when will  this plan be launched?

- It is up to an officialdom speed. But the plan will be launched in spring. Everything that is written down there is possible to start in 2-3 months.

And what is the time the crisis will occupy... There is general opinion of economists: most likely, one year will be enough - and then the economy will start growing. It means we will fall up to 3% of GDP in 2015, and in 2016 there will be either zero, or small plus. How will we work?... Business needs time to adapt. It is necessary for families to build strategy of survival in conditions when it is difficult to find work, it is necessary to train for a new profession or look for work not in the specialty.

Of course, a lot of things will creep down from the first quarter of 2015. The number of passenger flights, passenger and freight railway and automobile traffic will decrease, people will visit restaurants less. There will be consumption "optimization" - not among poor people but among people with average income.

It is clear that those who lived badly before crisis will have troubles. But at present time the country is not in a condition of consumer hunger which it stayed even in 2009. We’ve transferred the previous crises recently, and they made us stronger.

For more information check "Extra barrels. Will increase in oil prices rescue us again?"