If you can think of two things no one would like to do in Russia at the end of January, standing around in a line and fighting a war come to mind pretty easily. But that’s exactly what seems to be in the cards for far too many Russians as the Ukraine and economic crises continue howling like a bitter wind that never ceases.
The acceleration of both appears to be assured right now, especially if the West continues to link aggression in Ukraine with more economic sanctions – which at this point will have to be severe to be considered “new”. The new Cold War is definitely on, but there are no assurances that it will continue to be cold much after the freeze of midwinter.
The story of today is the price of oil. A month ago it looked as though it couldn’t go any lower as US wells were pegged to a production price of about $80 per barrel. Now, it’s at $60 per barrel. There are signs that many US wells will indeed keep operating as improvements in efficiency and a lower operating cost once the sunk costs once well is started leave room for more profit even at this low price. Cheap oil may be here to stay longer than we thought.
But with that, we still have the problems in Russia. The Ruble has fallen off a cliff, a problem often blamed on the price of oil. It’s deeper than that, and the flailing Russian response has in some ways made things worse. The currency has lost about 60% of its value in one year, versus about 40% for oil.
That’s not to say there aren’t threats as well as opportunities in the US beyond oil itself. Cheap oil changes a lot of games, and is worth thinking through.