“We are not going to change our minds because the prices went to $60 or to $40, OPEC will stand by its decision not to cut output even if oil prices fall as low as $40 a barrel and will wait at least three months before considering an emergency meeting,” the United Arab Emirates energy minister Suhail Al-Mazrouei said in Dubai on Sunday.
The Paris-based International Energy Agency is reporting the global glut of oil will persist next year, putting further pressure on prices and, in the case of Russia, reduce exports and depress their demand.
Wall Street is already betting that Russia and Venezuela are getting closer to defaulting on their debt. This stems from the fact that the Russian government gets half of its revenue from oil and gas exports and Venezuela oil makes up 96% of the country’s export earnings, which is already in deep debt and has been burning through its foreign currency reserves.
Late on Tuesday, the Central Bank of Russia raised interest rates from 10.5% to 17%. However, that could not stop the ruble’s decline to a new low against the dollar. At one point on Tuesday, a dollar could buy 79 rubles compared to 33 in January. Later Tuesday, the currency stabilized closer to 68 rubles to the dollar. Of late, new measures include buying gold bars with a declining ruble in an attempt to stem the ruble’s collapse and shore up international reserve assets hovering around $420.5 billion.
The Institute of International Finance is reporting that, with every dollar that the price of oil declines, the Venezuelan government loses $800 million in export receipts. The government has been selling assets and borrowing from China, but the continued decline in oil prices could force a “massive devaluation.”
In both scenarios these economies rely heavily on energy. The resulting downward price pressure is raising the risk of unrest and social instability and, if finances deteriorate, is expected to cause worsening financial conditions and the inability to pay back debt. This would likely force a warning downgrade by credit rating agencies.
Saint Lucia is heavily reliant on Venezuela’s goodwill and the PetroCaribe alliance and, as such, you can understand why this is causing much discomfort on many fronts. In an attempt to appease the public, prime minister and minister for finance Kenny Anthony has announced that at the next price adjustment due on Monday, January 12, 2015, consumers can look forward to a reduction in the price of fuel.
“I would expect on the last three months up until January, because of the reduction of oil on the world market you are going to see a significant reduction on the domestic market,” ~ Kenny Anthony.