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US oil export, Federal Reserve’s higher key interest rate to cause no shock

December 17, 2015, 21:24 UTC+3 Zamyatina Tamara
© Viktor Drachev/TASS Archive

MOSCOW, December 17. /TASS/. Neither the US Congress’s likely decision to lift the ban from the export of oil nor the Federal Reserve’s decision to raise the key interest rate will have any drastic effects on the price of crude on the world markets or the exchange rate of the Russian ruble, polled analysts have told TASS.

US Congress leaders have agreed on the lifting of the nearly 40-year-old ban from the export of crude oil, Bloomberg reports. As the House of Representatives’ speaker, Paul Ryan, has said, the issue will be put to the vote on Thursday, December 17. The bill will then be handed over to the US Senate.

The US Federal Reserve has for the first time in nine years raised the key interest rate to 0.25%-0.5%.

Russia’s Economic Development Minister Alexey Ulyukayev has said the Federal Reserve’s decision will have no considerable impact on the price of oil or the exchange rate of the ruble. In turn, the head of the Civil Initiatives Committee, former deputy prime minister, Alexey Kudrin said that the Federal Reserve’s higher interest rate would push down the emerging markets’ currencies. Also, he predicts a further decline in the price of crude oil, Kudrin said in his microblog in Twitter.

The chairman of the VTB bank’s observer council, former Bank of Russia governor Sergey Dubinin believes that the Federal Reserve’s higher key interest rate will cause indirect effects on the emerging markets, if at all. "This decision has been expected for quite a while, at least for the past six months. Those who wished to have already adjusted themselves to the higher key interest rate to invest in securities. Capital flight from the emerging markets has already taken place. There will be no powerful changes on the emerging markets, including the Russian one," Dubinin told TASS.

"As far as the price of oil is concerned, according to the formal logic it will have to be paid for with a more expensive dollar, so the price of one barrel may go down. It will be fluctuating within the same range as the exchange rate of the dollar. No radical changes are due," Dubinin believes.

"If the Federal Reserve’s key interest rate is frozen at the current level, the world markets will get calmer. If a guessing game gets underway and a further unpredictable rise in the key rate by the very same 25 points follows, the profiteers will stop to think what this is all about. My personal forecast is this will not happen within six to nine months to come," Dubinin believes.

As for the US Congress’s decision to cancel the oil export embargo, the US does not produce enough of it to cause a shock effect on the current oversaturated market, where oil tank farms are brimful, says energy markets expert, former research director at the holding company BP Russia, Vladimir Averchev.

He recalled that oil refineries around the world were tooled to certain blends of crude.

"Prompt transition to refining US light crude will be impossible for technological reasons. This will require fundamental readjustments of the equipment and tremendous investment. This is hardly reasonable. It is not ruled out that after the United States elects a new president the lifting of the oil embargo may be revised," Averchev told TASS.

"The main aim of the US oil export embargo was to guarantee internal energy security. The forthcoming lifting of the embargo will cause a risk the flow of oil to the domestic market of the United States as the main consumer of hydrocarbons may run dry. The lifting of the oil export embargo is a reversible decision and the potential buyers of US oil will certainly keep this in mind," Averchev said.

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