As an investor, perhaps you are thinking about purchasing some property that contains oil reserves. Perhaps you are saying to yourself, “yeah, but, isn’t it a bad option right now?” Well, what is currently taking place in Russia’s national economy hinges on the oil economy, and the prospects for investors are quite promising.
Is the ruble collapsing?
The central bank of Russia spent nearly $6 billion USD of its international reserves in a desperate attempt to prop up the failing ruble, Central Bank chief Elvira Nabiullina said. “We currently supporting the exchange rate and selling funds from our reserves and have sold about six billion dollars in the past ten days,” Nabiullina is quoted as telling the State Duma on Monday, October 13, 2014.
The Central Bank chief went on to say that fixing an artificial exchange rate would be counterproductive and would contradict market factors. “We won’t be able to restrain them,” she said.
Additionally, Nabiullina stated that the ruble is not in a free-fall and its dynamics are influenced by multiple market factors, particularly world oil prices.
Russia’s central bank is preparing a stress scenario for future monetary policy, but thinks it unlikely that events will play out in the manner described in the scenario, which includes an oil price drop to $60 per barrel. “I think there are low chances for this,” said Nabiullina.
The sanctions imposed by the U.S. and the E.U. are having a negative effect on the Russian economy. Russian President Vladimir Putin, in an act of revenge against the Western sanctions, signed a decree on August 6 that forbade the import of U.S. and European agricultural products. This act has caused widespread price hikes and massive food shortages throughout Russia.
Crude oil and Russia’s economy
Crude oil production is very closely tied to the Russian economy. With the enforcement of the sanctions from the United States and the European Union, 100 million tons of annual oil production is at risk, according to Vagit Alekperov, the head of LUKoil, Russia, No. 2 oil company.
The United States and the European Union have issued sanctions forbidding U.S. and E.U. firms from supporting Russian production or exploration activities in shale, Arctic offshore, or deep water projects.
Nearly a quarter of Russia’s oil comes from hard-to-access reserves that require powerful, American-built pumps to force the oil out of the earth.
Russian oil companies are now scrambling to find domestic producers and suppliers to help them, but “not all of [them] can be fully replaced,” said Alekperov.
Investing in oil is a great idea
As oil prices fall, now is an excellent time to get into the oil industry. Before you purchase land with oil or gas reserves, however, you should contact a trustworthy gas and oil title attorney. The attorney will be able to help you with your purchase much better than if you tried to do it yourself. Follow the link for more information.