Russia braces for declining oil revenue as prices forecasted to drop
The Russian Ministry of Economic Development has revised its forecast for the price of Urals oil in 2025, lowering it to approximately $56 per barrel. The independent, non-Kremlin service moscowtimes.ru reports that this represents the largest decline since the early days of the COVID-19 pandemic in 2020.
The 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, reducing the average price of Urals oil to $56 per barrel for 2025. This is the lowest level since 2020 when the pandemic suppressed oil demand, and the average price was $41.70 per barrel.
Russia. Oil price falls below significant threshold
The new forecast is considerably lower than the one assumed in the Russian budget (the estimated rate for a barrel of Urals oil was $69.70) and below the so-called cutoff price of $60, on which expenditures are based. Revenues from oil priced above this threshold contribute to the Russian National Welfare Fund. If the price falls below $60, the shortfall is covered by this fund.
Experts anticipate that each dollar decrease in oil price costs the budget approximately 160 billion rubles (around 2,6 billion CAD) annually. If the price drops to $55 per barrel, the revenue gap could reach 0.9 trillion rubles, which will need to be addressed in some manner.
Despite the challenges for the Russian economy, which heavily depends on oil and gas revenues, the ministry has not altered the economic growth forecast for 2025, which is projected to be 2.5 per cent.
