Forget Glasnost, Mikhail Gorbachev and the arms race. What really broke the Soviet Union was the collapse of oil prices in the late 1980s. The late economist Yegor Gaidar, one of Boris Yeltsin’s prime ministers, wrote in 2007 that the empire’s fall could be traced back to Sept. 13, 1985, when Saudi Arabia, fed up with holding back supply to prop up prices, opened the spigots in a quest to recover lost market share. That day, he argued convincingly, was the beginning of the end.
The USSR, pumping almost 12 million barrels a day, was the world’s largest producer at the time. Riyadh’s change in policy caused a price shock: Oil fell from about $25 a barrel to less than $10 in the months that followed, and stayed low for the rest of the decade, costing the Soviet economy $20 billion a year in lost revenue—“money without which the country simply could not survive, ” Gaidar wrote.
Russia is the world’s biggest oil producer again now (though Saudi Arabia is the biggest exporter) but its economy still depends heavily on selling energy. Oil and gas exports account for about half of Russia’s budget and about 30 percent of its GDP. This makes it vulnerable. If the West wanted to punish President Vladimir Putin for his land grab in Crimea, runs the argument, it should target the energy revenues that keep his petro-economy afloat. (…)
(The extract above is published courtesy of Politico. The rest of it is here.)
I’m busy. In addition to editing the ever-expanding Petroleum Economist and its excellent new channel on unconventional energy (called, imaginatively enough, PE Unconventional), I’ve four major writing projects on the go.
- A long piece for The Economist on the tar sands (or oil sands, if you prefer)
- An in-depth look, for Petroleum Economist, at Iraq’s ambitions as an oil producer
- Another take on the global gas glut, also for Petroleum Economist
- And my book on oil addiction and the decline of the West
The last of these is a weekend and weekday 5am-7am project. The early starts are the only hours I can find when my children aren’t commanding space, time, and energy. (**I’m not complaining. Frankly, they’re more interesting.**)
The usual requests: if anyone wishes to contact me about stories, you know where to find me.
I’ve been writing a lot about shale gas: the implications of the “revolution” (BP boss Tony Hayward’s description) on global energy supplies and the geopolitics of energy. A piece earlier this month in The Economist, a recent one in Prospect, and numerous articles in Petroleum Economist have been the outlet for months of interviewing on the topic. Continue reading