Is Russia OPEC’s True Target In Oil Price Plunge?

crudeoilThe Silver Bug: Oil prices continue their slide downward, now sitting at $65.27 per barrel. OPEC has successfully in all practical senses “crashed” the oil market, bringing much uncertainty and confusion to the broad general markets.

Given that the markets worst enemy is uncertainty, this has investors around the world on edge as we head into the holiday season.

Although this is a blessing for consumers and the man on the street, given the lower price at the pump and heating cost, it has inflicted serious damage on the US shale market and other countries that depend on oil as their main export.

One country that is feeling the pain more than any other is Russia, who depends almost predominately on its oil production.

It is no secret that Russia has entered into a period of increased hostilities with the West and its allies.

This has lead to many economic sanctions on Russia, which have had mild success at best.

As mentioned in my last post, it is very likely that OPEC’s decision to collapse the price of oil runs deeper than the surface story being give. Granted OPEC undoubtedly is feeling threatened by the booming US shale production and would like to see it collapsed.

Although in reality they will have a difficult time in doing so, given that some shale producers are indicating that they can profitable produce at $40 – $50 per barrel.

Also, given OPEC’s long history of being an ally with the United States and a friendly trading partner, it leaves much to wonder as to why they would take this hostile action against one of their closest allies.

Perhaps, in reality, the US was not OPEC’s main target, perhaps an ulterior motive was in mind, that is not being discussed in the main stream media.

Speculation has arisen that OPEC’s main target is in fact Russia.

Who, as previously mentioned, depends almost completely on the price of oil. This price drop has done what no sanction from the West has done so far, it has sent the Russian economy reeling.

The Ruble is tumbling, recently falling 5% versus the US dollar.

The average income of Russians is expected to drop by 2.8% next year and GDP is rapidly shrinking, with a now updated forecast of -0.8% next year being indicated by the Russian economy minister.

Russian_GDP_Growth_2015

 

(Chart source, the Guardian)

Not only is Russia dealing with falling incomes and revenues from the price drop in oil, but they are also dealing with another threat. Inflation.

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