Russia braces for economic challenge as oil prices dive
The Russian Ministry of Economic Development has lowered its forecast for the price of Urals oil in 2025 to just $56 per barrel. The independent, non-Kremlin website moscowtimes.ru reports that this is the largest drop since the early days of the pandemic in 2020.
Russian authorities are preparing for several years of low oil prices. The Ministry of Economic Development recently updated its forecast for the years 2025-2028 and reduced the average price of Urals oil to $56 per barrel for 2025. This is the lowest value since 2020, when the pandemic caused a decrease in oil demand, and the average price was $41.7 per barrel.
Russia: Oil price falls below important threshold
The new forecast is significantly lower than the one assumed in the Russian budget (the estimated rate for a barrel of Urals oil was $69.7) and lower than the so-called cutoff price of $60, which is used for planning expenditures. Revenues from oil sold above this price go to the Russian National Welfare Fund, and if the price falls below $60, the shortfall is covered by this fund.
Experts predict that every dollar decrease in the oil price costs the budget about 160 billion rubles (around $2 billion) annually. At a price of $55 per barrel, the revenue shortfall could amount to 0.9 trillion rubles, necessitating compensation in some manner.
Despite the challenges for the Russian economy, which relies heavily on revenue from oil and gas, the ministry has not revised its economic growth forecast for 2025, which remains at 2.5 percent.
