Why does the ruble depend on oil and not on gas or gold? Why does the ruble exchange rate depend on the price of oil, but the dollar exchange rate does not?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The cost of the national currency and the price of oil are directly proportional.

Many in our country are wondering why the ruble depends on oil. Why is it that if the price of black gold decreases, the price of imported goods rises, is it more difficult to get out to rest abroad? At the same time, the national currency becomes less valuable, and with it, all savings.

Why does the ruble depend on oil prices?

The price of the ruble is set depending on the proposals for the euro and the dollar on the Moscow Exchange. However, there are many factors that affect the fluctuations of the currency market. Very often the question arises why the ruble depends on oil and not on gas? Blue fuel also forms the price of the ruble, but to a lesser extent.

The Russian economy and its budget are dependent on the price of raw materials. Half of the income of the treasury is formed from the profit that the country receives by trading in oil, gas and metals.

The exchange rate of the ruble depends on the prices of energy resources that form the export of the Russian Federation. They areand determine the state of the current account of the balance of payments.

From this question, no less logical is formed: why does the ruble depend on oil, but the dollar does not? After all, the United States also has hydrocarbons. And their oil prices fell as fast as ours.

The fact is that the ruble is more of a commodity currency. The USA in this sense earns more variously. Indeed, with the development of various sectors of the economy, it is easier for the national currency to stay afloat. Therefore, the dollar is more stable and less prone to crisis fluctuations.

Reasons for cheap oil

To understand why the ruble depends on oil, you need to understand what factors shape the price of hydrocarbons.

Several factors led to the rapid fall in the price of black gold on a global scale:

1. The main consumer in the global hydrocarbon market is China. The period of intensive growth of the economy of this giant has passed. Now the PRC is not developing at such a frantic pace, so it needs less raw materials.
2. Producers of cheap shale, the USA, dump world prices for minerals, in turn, monopolists in the market lower prices as much as possible to squeeze out a competitor.
3. The recent lifting of sanctions against Iran has led to the fact that this country began to increase its oil production. At the same time, OPEC members also do not want to reduce the rate of black gold production.

The hydrocarbon market has formed a surplus when supply exceeds demand. Now the buyer dictates the price to the market, so the pricedeclining.

Prerequisites for rising energy prices

The rise in oil prices, observed some time ago, created some preconditions for a more or less stable ruble. In general, over the last period, the national currency is kept in one corridor. This is to the question of why the ruble depends on oil. Such a small stabilization is caused by the recent agreement of the member countries of OPEC. Major exporters of black gold have pledged to reduce the rate of hydrocarbon production.

The situation has temporarily stabilized, and the price of oil has risen slightly, allowing the national economy to breathe a little.

How to save the national currency?

In fact, there are not so many ways out of the oil crisis, which is pushing the ruble to the bottom and rocking the national economy.

First of all, and this is obvious, we should wait for the rise in fuel prices. The issue is that no one knows when the price of oil will become adequate. After all, Russia is not the only country producing black gold. In addition, technologies that make it possible to obtain alternative energy do not stand still, and this, again, affects the demand for oil, respectively, and prices.

A more progressive option is to develop other sectors of the economy. The idea of import substitution in this sense is very useful. Now we are becoming not just consumers of the goods that we have been supplied from abroad. The country itself creates these benefits, using its own resources, including human resources. This is not a one day strategy. With such a development, the question: “Why the rubledependent on oil? won't be as sharp. This strategy will make the domestic currency more stable and citizens more socially secure.

Devaluation

Russian budget revenues fell sharply after the collapse in oil prices. Correction of the national currency exchange rate allows for some time to balance the country's economy.

The longer the ruble is able to stay in one corridor, the less consequences threatens the country's budget. The Russian economy is very dependent on imports, so the dollar, being in the range of 55-60 rubles, does not allow high inflation.

In general, the intensity in the foreign exchange market has been reduced due to import substitution. This strategy directly stimulated the agricultural sector of the economy. Domestic products can now compete in price and quality with imported ones. The sharp strengthening of the ruble is not beneficial for the same reasons.

Also, there is another tool used by the Central Bank of the Russian Federation - an increase in the interest rate. A high interest rate strengthens the ruble as it attracts market participants to keep money in the domestic currency.

Stock Speculation

It's no secret that they earn money on exchange rate fluctuations. Very often, serious financial organizations and banks are included in the game process. By operating with large amounts, participants can significantly influence the redistribution of the forces of currencies, because in this way it is possible to change supply and demand. Small players, trying to get the hang of it, will only unbalance exchange ratefluctuations.

It is difficult to influence the US dollar, because trillions are launched into the world system. The mass of the ruble in world circulation is relatively small. In principle, it would be easy to collapse if it were not for the occasional intervention of the Central Bank of the Russian Federation.

The Central Bank has foreign exchange interventions and monitors the adequacy of changes in the domestic currency. By selling interventions, the ruble is strengthened. Buying dollars - reduce.

In the early 2000s, when the price of oil was extremely profitable, the Central Bank bought dollars in reserve.

Why does the ruble depend on oil and not on gold?

Now there are almost no countries left in the world that would tie their currency to the gold reserve. Based on reality, one ruble contains about 4 gold kopecks. For example, the US dollar contains about 3 gold cents.

Previously, when money was minted from alloys containing gold and silver, they were backed by themselves, but for almost 50 years, the currency and the country's gold reserves have been going apart.

At the moment, the Indian rupee leads in terms of gold supply, which is backed by gold by 7%.

Since the domestic currency is weakly backed by gold, there is no need to talk about dependence on gold reserves.

The reasons for the jumps and falls of the Russian currency can be very diverse. They are often difficult to analyze. Maybe a little time will pass, and the question of why the ruble dependsfrom oil, will not be as relevant.