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The current high price of oil cushions russias public

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Unformatted text preview: weeks, consumption is topping the year-earlier level by nearly one million barrels a day. Demand in the four-week period ended Dec. 17 averaged nearly 19.7 million barrels a day, the highest level since Feb. 20, 2009, according to the U.S. Energy Information Administration. Back then, gains were fueled by the oil price collapse to $40 a barrel, from the summer 2008 record high near $150 a barrel. January crude futures ended last week at a two-year high of $91.51 a barrel, up 13% in the last month. Encouraging U.S. economic data spurred prices higher on Thursday, particularly a drop in new jobless claims. U.S . oil inventories have also dropped over 5% in the last three weeks of government data. Strong demand could prove to be a mirage, but if sustained, it may provide the grounds for a run on the $100 -abarrel mark. Improving U.S. demand would add to dynamic growth in emerging economies like China, and further draw down excess supplies. 16 | P a g e Russian Oil DA BDL High Prices Key to Russian Economy [____] [____] High oil prices are critical to keeping Russian budget balanced Andrew E. Kramer and David M. Herszenhorn, foreign policy contributor to the New York Times and political journalist for the New York Times, 2012 (New York Times, 6/23, http://www.nytimes.com/2012/06/24/world/europe/former -russian-financeminister-warns-of-recession.html?_r=1) Mr. Putin, in an apparent reference to the West, said heads of state must show “effective leadership and a responsible course of action” to halt the euro zone sovereign debt crisis. “That means a balanced-budget policy, control over state debt and fiscal discipline,” he said. “Rampant financial speculation and political populism are equally dangerous.” But Mr. Kudrin said Mr. Putin might need to rethink some of his own populism and renege on spending promises. Otherwise, Mr. Kudrin said, Russia’s budget could become too vulnerable to a downturn in global oil prices. During this year’s presidential campaign, Mr. Putin announced higher wages, better maternity leave benefits and greatly expanded military spending in the coming decade . “We need to look again at all programs being launched o r expanded,” Mr. Kudrin said. “Even our current expenditures will be difficult to meet.” To balance even this year’s more modest budget, Russia needs oil prices for European export of $117 a barrel or higher; the price on Friday was $90.37. Russia’s economy suffers when oil prices decline. The Kremlin, Mr. Kudrin said, should brace itself for an extended oil price slump to $60 per barrel or lower. 17 | P a g e Russian Oil DA BDL High Prices Key to Russian Economy [____] A drop in oil prices would be devastating for the Russian economy – causes budget deficit and a decline in their credit rating Andrew E. Kramer, foreign policy contributor to the New York Times, 2012 (3/17, Putin’s Big Promises Need Fueling By Higher Oil Prices, http://www.nytimes.com/2012/03/17/business/global/vladimir-putins-big-promises-need-fuelingby-high-oil-prices.html?_r=1) His apparent aim was to shore up support from the rest of Russia: poorer and rural parts of the country, and from state workers and the elderly. The repercussions of his campaign promises, and an earlier...
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