Sunday, May 17, 2009

Russian (and Central Asian) Oil

An article in yesterday's NYT reports that Russia's financial position has shifted dramatically in the past year because of the decrease in oil prices. Andrew Kramer reports (here) that Gazprom entered into a number of long-term purchase contracts with central Asian countries during 2008 -- when prices were at their peak:
In his zeal to monopolize gas supplies, Vladimir Putin, who is now Russia’s prime minister, committed Gazprom to long-term contracts with Central Asian countries for gas at a cost far in excess of current world prices. Now that the world economic crisis has sharply curtailed demand for gas, Gazprom is saddled with a glut of expensive Central Asian supplies that it is forced to sell at a loss.
This is a signficant development for the Russian government because Gazprom is the country's largest taxpayers, and its tax payments this year will decrease from $40 billion to $22.5 billion.

222. Gas prices have increased to about $2.20 / $2.25 per gallon (from less than $2.00 one month ago). Will the increase continue? What's causing it? I get the sense that economists are still very divided as to whether the biggest large-scale concern is inflation or deflation.

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