OIL WARS: Venezuelan Economy Gears Up for Default – Russian Ruble Hits New Low

oil venezuela
Bad news for the Socialist paradise

The Venezuelan economy is gearing up for a default thanks to sliding international oil prices.
Legal Insurrection reported:

Latin American socialist paradise Venezuela is gearing up for a default of its own, as precipitously falling oil prices have decimated the country’s budget and will continue to pressure its currency reserves. Since mid-June, crude oil prices have declined by more than 30% , with West Texas Intermediate (the benchmark measure for North American oil) dipping to $60.55/barrel before ultimately settling at a 5-year low of $61.54/barrel on Wednesday.

A CNBC report on the prospect of a Venezuelan default cited a Capital Economics report stating that a default could be expected by next September or October when $5 billion in debt payments come due. Only an upswing of oil prices to somewhere around $121/barrel would allow Venezuela to balance its budget, according to some estimates. But with OPEC recently slashing its 2015 production levels to a 12-year low in response to decreasing estimated global oil demand and increasing supply via U.S. shale production, a significant oil price increase in the short-term seems highly unlikely. Bloomberg reports that the implied probability of default—derived from complex financial formulas—in the next five years stands at 93% , the highest in the world.

And, the Russian ruble fell below 57 to the dollar this week. The ruble has cut its value by nearly one-half this year.
Radio Free Europe reported:

The Russian ruble fell below 57 to the dollar in trading on December 12, continuing a slide that has cut its value nearly in half this year.

The ruble’s value against the dollar and the euro has continued to decline despite Russia’s effort to shore it up by raising a key interest rate by one percentage point on December 11, the fifth increase this year.

The ruble was trading at about 57.31 to the dollar at midday on the Moscow exchange and later fell below 57.5.

One euro was buying more than 71 rubles.

The Russian central bank raised its key interest rate from 9.5 percent to 10.5 percent on December 11 — and almost double the rate of 5.5 percent in March, when President Vladimir Putin set off a tense confrontation with the West by annexing Crimea from Ukraine.

Crude oil prices have dropped significantly the past year.

1 Year Crude Oil Prices - Crude Oil Price Chart
Photo of author
Jim Hoft is the founder and editor of The Gateway Pundit, one of the top conservative news outlets in America. Jim was awarded the Reed Irvine Accuracy in Media Award in 2013 and is the proud recipient of the Breitbart Award for Excellence in Online Journalism from the Americans for Prosperity Foundation in May 2016. In 2023, The Gateway Pundit received the Most Trusted Print Media Award at the American Liberty Awards.

You can email Jim Hoft here, and read more of Jim Hoft's articles here.


Thanks for sharing!