Why do oil prices fall?

Fluctuating oil prices has been a trend of recent years. Radio Sputnik International observer Dmitry Babich, who paid a visit to the video studio of Pravda.Ru, said that the ongoing drop in world prices on oil was contrary to both economic and political laws. According to our guest, the current state of affairs in global economy is strange, to say the least. 

Falling oil prices are unnatural in today's world

"The trend of the current year is the volatility of oil prices. Are we entering the time of unpleasant surprises and shocks?"

"I think we are entering the period when all trends are unexpected. In fact, no one knows how the situation will develop. Economists do not know what will happen. Market fluctuations reflect human emotions and expectations - they are just as volatile and unpredictable as the weatherю

"When another economic system is created, in which it will be possible to make predictions, it will be the time when economic science starts working. In today's economic system in the world, one can not either plan or predict anything."

"All this is, basically, a speculative market. Oil trade and the whole economy is based on futures - the sale of future contracts."

"Everything is based on expectations of economic growth or recession - it's either expectations of prosperity or belt-tightening. People make mistakes, they rush in different directions, and markets and politics remain volatile.

"Who would have believed it in 2012-2013 if they were told that there would be a war in Ukraine with the use of tanks, artillery and rockets? The current unpredictable actions of Western players in the political market complements the unpredictability of economic markets. Today, it is impossible to make reasonable qualified forecasts.

"Many compare the current situation to the late 1980s, when Saudi Arabia dumped oil prices to ten dollars per barrel. Nowadays, it is not only Saudi Arabia, but also the United States that is dumping oil. They conspired to break Russia up, as they did in the past to the Soviet Union. Do you think such a theory can be reasonable?"

In 1991, the USSR was not supposed to collapse

"This theory has existed for many years, but there are many gaps in it. In 1991, the Soviet Union was not supposed to collapse, because 1991 was the time of the war in the Persian Gulf. Everybody was expecting a disaster as the straits that lead into the Persian Gulf were likely to be blocked. Oil prices were supposed to skyrocket, and the Soviet Union was supposed to survive, because in 1991, the USSR would have received a powerful doping of petrodollars. Yet, it did not happen. 

The collapse of the Soviet Union was not the result of low prices, it was not the matter of economy or the dumping of Saudi Arabia and the United States. They could only support the trends that were already happening on the market. In 1991, the US government was even afraid of the collapse of the USSR. No one knew how the situation would be developing. The US elite used to be less adventurous than it is now.

"I think that there were more fundamental issues that Saudi Arabia and the United States could support at some point. The current decline in oil prices is somewhat unnatural. Oil prices rise during the times of war. This, for example, was very noticeable after the US invasion of Iraq. Nowadays, there are at least three major conflicts going on, but oil prices are falling - this is unnatural."

"Can oil prices fall down to the level of ten dollars per barrel?"

"They surely can, but no one can predict that. I am convinced that the Ukrainian crisis had not been planned. I think that the European Union and the United States, when they supported the Ukrainian opposition, they wanted to put pressure on Yanukovych, to push him towards making the decisions that they wanted him to make. They could not predict either his fall or the conflict that it would trigger in the Ukrainian society.

"The first Maidan did not start a civil war in Ukraine. The second one did. They could not predict Russia's actions in the Crimea either. Today, the levers of influence on world politics and economy are in the hands of not very educated people. Most importantly, these people bear no responsibility for their actions.

"The United States admitted that the invasion of Iraq in 2003 was a mistake. The States lost 4,000 soldiers, thousands others were crippled.The Americans had spent a few trillion dollars on that war, but no one went to jail, no one was even demoted. These are nothing but lies in millions of kilobytes. And no one is responsible.

If someone in the USA says that we need to listen to what Putin says, that person will be immediately fired. It is only Henry Kissinger, who can say such things in the US. Such people as Kissinger or Stephen Cohen have nothing to lose."

"Lower oils prices affect the Russian economy. What may happen in the near future? What lessons should we learn from this crisis?"

"Lessons can be learned even from the Soviet crisis. It was much more painful than the current crisis. If someone tells me that life in today's Russia is bad, it would mean that this person did not live in the Soviet Union in late 1980s and in early 1990s. The Soviet Union was living under sanctions for some thirty, forty, if not fifty years. The USSR was not flexible. 

"Today, the West is a lot more aggressive against Russia than it was during the times of the Soviet Union. Yet, the West has not broken Russia, because we have market economy.

Interview conducted by Lyuba Lulko


Read article on the Russian version of Pravda.Ru

Also read: Who is standing behind collapsing oil prices?

The price of oil

Oil, economic warfare and self-reliance  

Drop in the price for oil and interests of the United States

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Author`s name Dmitry Sudakov