A perfect storm has ravaged Russia’s national economy. With the price of oil imploding, the impact of its decline is inflicting devastating pain on the Russian economy. Fiscally , oil and natural gas revenues account for half of the state budget. The fall in oil prices is compounded by economic sanctions imposed by the European Union and the United States and Canada in response to President Putin’s aggressive polices vis a vis Ukraine.

There is nothing Putin can do about oil prices, especially with stagnant global demand and rising domestic production in the United States due to advances in shale extraction technology. However, he could mitigate the economic crisis through a more restrained policy on Ukraine. I doubt that will happen; it appears that in Russia, as with many other countries, nationalism trumps rational economic considerations.

It appears that bleak times are ahead for Moscow, and Russia’s nascent middle class. Just in the past 24 hours, the ruble dropped in value another five percent, all this in the wake of its earlier freefall when oil prices began to plummet. The erratic actions by Russia’s central bank only point to the inability by Russia’s rulers to arrest what will likely be a long-term period of economic recession and stagnation.

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Since mid-June the price per barrel of petroleum has collapsed by a staggering 37 percent. This almost perfectly  mirrors–in reverse- -the steep rise in oil prices  in mid-2008, which was followed by an equally sharp contraction when the Great Recession–the onset of the global economic and financial crisis–struck with full fury.

Only a few years ago, the talk in global investment circles was about the phenomenon of Peak Oil.  However, several factors have converged to precipitate the collapse of oil prices. Not only has the continued slump in the Eurozone  softened global demand for petroleum exports; the production of shale-derived oil in the United States, enabled by cost-effective technological breakthroughs in extraction, has greatly increased the global supply of oil, while dampening demand in the U.S. for oil imports. Furthermore, China’s growing appetite for imported oil has been at least partially retarded by lower rates of economic growth. In addition, OPEC has failed to cut global production, thus maintaining high global output of oil.

Oil remains a volatile commodity. A new crisis in the Middle East, particularly with Iran, could easily spike oil prices. However, if the economic forces that have propelled the downward  pressure on petroleum prices prove stable, the result could very well be fiscal calamity for several oil-dependent economies, particularly those of Venezuela and Iran, and to a slightly lesser degree Russia. Left uncertain is the long-term impact of shale oil extraction in the United States, which requires prices above the cost of extraction, currently in the mid-forty dollars per barrel range, to remain economically viable. With the current per barrel price of oil below 70 dollars, it is not inconceivable that further declines may place the booming shale oil industry in the U.S. in a serious quandary.

The current collapse of oil prices, combined with other negative economic trends, opens up long-term implications that will further upset the already fragile state of the global economy. The short-term befits of lower prices at the gas pump will be likely offset by the worldwide ramifications of shrinking fiscal resources for major oil-exporting emerging economies, which may place financial institutions and investment firms at risk that are highly exposed to debt by sovereigns that are highly reliant on oil exports.

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

CLICK ON IMAGE TO VIEW VIDEO Hillary Clinton Nude