What happens when the oil price drops?
After Donald Trump's latest tariffs announcement, oil prices dropped by around 20 percent within a week reaching their lowest level since the pandemic, when they turned negative. Europe's consumers are also feeling the effects: fuel prices at German petrol stations dropped by around 10 cents for two days in a row. A look at Europe's press shows who will be most worried by this downwards trend.
From money tree to millstone
In The Moscow Times, economics professor Igor Lipsiz sees the financial basis for the Russian state running dry:
“With oil prices this low - less than 60 dollars a barrel [for Urals oil] when the national budget is based on about 70 dollars - not only is this a drop in domestic revenues but it means the oil and gas sector has gone from being a source of income to a source of losses - which could even end in its decommissioning. That would be beginning of a catastrophe: no more gas in the cities or fuel at the petrol stations. So the state will have to hurry up and subsidise these industries ... Which is why Gazprom CEO Alexey Miller is pushing so hard for permission to raise the domestic price of gas when and how he sees fit.”
A black swan for Putin
The effects of Trump's tariff policy are particularly devastating for Russia, writes columnist Ivan Yakovyna in NV:
“Russia is so dependent on oil prices that everything goes wrong there as soon as oil prices start to fall. Basically, by triggering this global trade war Donald Trump has become a 'black swan' [an unexpected event with major repercussions] for Vladimir Putin. The American president has made it absolutely impossible for Russia to achieve a deficit-free balance sheet for 2025. The Kremlin will now either have to print more roubles or borrow money at enormous interest rates on the external markets to be able to keep paying its military and state employees.”
Relief for European consumers
Economist Indrė Genytė-Pikčienė accentuates the positive in Alfa:
“The OPEC+ cartel surprised the markets at its most recent summit by announcing that it would be increasing output by significantly more than expected. As a result, the price of Brent oil plunged to 63 US dollars a barrel - compared to 82 USD in January, and having been as high as 91 USD a year ago. The prices of other energy sources followed this downward trend. The stronger euro is also having a positive impact in Europe because oil and its derivatives are traded in US dollars - and a strong euro makes imports more affordable. Energy sources are a key cost factor in the value chain, both for goods and services. If prices stay low for a while, in time, consumers will feel a considerable relief.”