Reuters reports that the price of crude oil on Russia’s domestic market has fallen to a shocking $12/barrel as the result of a supply glut. As we have previously reported, Russian industry has virtually shut down because of the national financial crisis, and the lack of demand has pushed the price of domestic oil into a state of horrifying freefall. Meanwhile, brutally high export tariffs have destroyed oil company profit margins on the international market as the price of oil has fallen well under $40/barrel, with Russia’s inferior Urals blend flirting with the $30/barrel barrier. With no profitable outlets for it oil, Reuters quotes a trader with a Russian major as follows: “We are about to start shutting down wells in Siberia.”
In yet more horrifying and undoubtedly related bad news, a Kremlin aide has admitted Russia may need to go begging for foreign loans in order to fund its budget next year, and may insist that all state-owned companies cut their dividend payments to investors in order to divert the cash to fill the Kremlin’s corrupt coffers. The last time the Kremlin experienced a budget deficit, it solved it by simply cutting off wage payments to employees and letting them starve. Will that too soon be in the offing?