Decrease in oil production growth rates is primarily accounted fro by the objective worsening of the conditions for its production. A considerable part of the oil fields currently in operation as at the stage of the decreasing production and new oil fields in most cases are characterized by worse mining and geological conditions, their development requiring higher capital, exploitation and transportation costs. At the same time the existing taxation system does not provide necessary decrease in the taxation load when developing new fields with higher costs, which limits the investments in new projects.
As a result the investments made do not provide the increase in oil production that would compensate the decrease in its production at “old” oil fields.
Against the background of production decrease in 2008, over the recent years there has occurred a reduction in physical volumes of oil export (table 3). According to the preliminary estimation net oil and oil products export was equal to 360.4 mln of tons in 2008 and decreased by 1.9% as compared with the previous year. The share of the net oil and oil products export in oil production was 73.9%.
Net oil export in 2008 made 49.5% of its production. In 2008 the share of export in furnace fuel production was 84.1%, in diesel fuel production – 55.1%, in car petrol production – 12.9%. At the same time there was an increase in oil products import observed, though the share of import in the covering of the internal demand remained low. Thus, in 2008the share of import in petrol resources was 0.7%, in diesel fuel and furnace fuel – only 0.4-0.5%.
The share of oil products in the structure of oil export increasing a bit, it was the crude oil export that still prevailed, making 67% of the total export of oil and oil products. As to the oil products export its main part was accounted for by the furnace oil used as a material for further processing in Europe and diesel fuel. At the same time one could notice the increase of oil products proportion in oil export, their share increasing from 24.3% in 2004 to 33% in 2008.
Increase in oil prices for oil in the first half of 2008 resulted in a considerable growth of incomes in the oil sector of the economy. Total profits from oil and main kinds of oil products export (car petrol, diesel fuel and furnace fuel) made USD 166.7 bln in January-August 2008, which exceed the annual earnings in all the post-reform period. For reference it can be mentioned that the minimum level of earnings from the oil export was observed in the environment of the drop of oil prices in 1998 when the export earnings were only USD 14 bln.
Table Oil, Oil Products and Natural Gas Export from Russia in 2002-2008, As Percentage on the Previous Year 2002 2003 2004 2005 2006 2007 (months) Oil, total 113.9 117.8 115.0 98.4 98.0 104.0 94. including:
to non-CIS countries 109.9 118.9 116.3 99.1 98.0 104.8 92.to CIS countries 137.3 112.4 108.3 94.9 98.0 99.Oil products, total 118.5 103.6 105.5 117.9 106.3 108.0 106. including:
to non-CIS countries 119.1 102.6 104.9 119.1 104.5 107.6 103.to CIS countries 102.8 132.3 117.9 94.6 148.8 115.Gas, total 102.4 102.0 105.5 103.7 97.6 94.6 110.Source: Federal State Statistics Service Under the influence of world prices for oil during the biggest part of 2008 there was a considerable growth of prices observed at the internal market. In summer 2008 the producers’ prices for oil, car petrol, diesel fuel and furnace fuel reached the figures that were the maximum for the whole postreform period. In the recent months under the influence of decrease of oil prices at the world market there has been observed a decrease in the internal prices for oil and oil products. In November average producers’ prices dropped in dollar terms beneath the level of December 2007. (table 4).
Table Internal Prices for Oil, Oil Products and Natural Gas in Dollar Terms in 2006-2008 (average producers’ prices as USD per ton) 2007 2007 2008 2008 DecemJune December June July November ber Oil 168.4 230.3 288.2 360.4 410.2 150.Car petrol 416.5 491.7 581.2 763.6 810.3 471.Diesel fuel 426.1 442.0 692.5 850.7 902.8 489.Furnace fuel 148.8 181.6 276.5 337.2 392.8 182.Gas, USD/1 thousand cu m 14.4 15.6 17.6 20.0 23.8 18.Source: calculated on the basis of the Federal State Statistics Service data In 2009 there are different scenarios for the development of the oil sector of the Russian economy depending on the prices of oil at the international market and the dynamics of the main macroeconomic indices, for instance, rube exchange rate. The differences in the scenarios to a high extent depend on the suppositions concerning the depth and the length of the crisis in the world economy and the scale of the capital outflow from the country. The result of the calculation of the tax load and profits of the oil sector made on the basis of the imitation model under different scenario conditions developed in the IET are presented in table 5.
As it is demonstrated by the calculations, in 2009 a considerable decrease in the world oil prices and increase in capital, operational and transport costs, dollar exchange rate remaining relatively low will lead to a substantial drop in the amount of both the tax earnings and the net profit of oil companies.
The price of oil grade Urals being USD 50 per barrel and dollar exchange rate being low, the oil sector has no possibility to pay dividends but still has an opportunity to finance investments at the necessary volumes. The price for oil being even lower and relatively low dollar exchange rate the figure of the net profit at the disposal of the oil companies becomes negative.
The scenario that is the most difficult for the oil companies is the one with theworld price for the oil grade Brent at USD 40 per barrel (USD 39 per barrel for oil grade Urals) and low dollar exchange rate (34.1 RUR/USD). Under such conditions the oil sector loses an opportunity either to pay the dividends or to finance investments to the full extent. At the expense of the sector’s enterprises in 2009 the investments can be financed only by 80%. The funds deficit makes USD 6.2 bln or RUR 212 bln.
Table Main Indices of Tax Load and Profits of Oil Sector in 2009 under Different Macroeconomic Scenarios 2009 2009 2009 2008 Scenario 1 Scenario 2 Scenario 3 Scenario (estimation) P=50 P=48,5 P=39 P=R=31,5 R=31 R=34,1 R=53,Taxes, USD bln 205.96 84.43 80.06 60.01 34.Net profit at the disposal of the enterprises, USD bln 18.56 1.33 –2..36 –6.21 7.Share of taxes in earnings, % 63.4 49.5 48.4 45.1 35.Share of taxes in the net profit, % 91.7 98.4 103.0 111.5 82.Net profit remaining at the disposal of the enterprises, RUR bln 481.0 42.0 –73.2 –211.8 390.Note. P – price for oil grade Urals, USD per barrel, R - ruble exchange rate against US dollar, RUR/USD Source: IET calculations Deficit of funds can be compensated in various ways. For instance, the decrease in the export duty rate for oil by the reduction of the limit level of taxation from 65 to 35-40% the oil grade Urals being USD 39 per barrel enables provision of the investments financing to the full extent. The decrease in the ruble exchange rate against US dollar down to 37-38 RUR/USD also gives the opportunity of investment financing to full extent.
Additional decrease in ruble exchange rate provides the growth of oil companies’ net profits. The exchange rate dropping below 50 RUR/USD even if the world prices for oil remain low the oil sector retains the opportunities of investments financing and the positive values of the net profit.
The scantiness of funds for investments can also be fully or partially overcome at the expense of the decrease in prices for services, materials and equipment, forming capital costs of oil companies. The deficit of funds for investment is overcome when the prices mentioned drop on average by 20%.
Countryside Development: from National Priority Project to State Program G. Rodionova Current results of the fulfilling of the state program for the agriculture development concerning the section of “Steady development of the countryside” are analyzed. The misbalance of the program executing regarding accelerated use of the budget funds insufficient attention being paid to the monitoring of the key social indices is emphasized. The solution of the housing problems in the countryside is limited by the low wages in the branch.
The main aim of the State program for agriculture development for 2008-2012 that substituted National Priority Project (NPP) was declared to be “the steady development of the countryside, increase in employment and living standard of the countryside population”. By the end of the first year of the program fulfillment it seems appropriate to summarize some results on the way to the goal.
In accordance with the declared aim the sections of the State program are forestalled by the section “Steady development of the countryside”. Such a placement of the problems of the countryside development may have considered revolutionary for the bodies governing agriculture in Russia, but if we turn to the allocated funds, target indices and reports on yje Program execution, we will find ourselves on familiar grounds measure by the thousands of square meters and the percentage of the used funds.
The provision of the resource funds for the countryside development planned for 2008 within the frameworks of the Program made less than 10% of the total funds for its execution. According to the section “Steady development of the countryside” the resources for the measures on improving the living conditions (61.3% of the funds for the section) and development of water supply and gasifica tion (30.4%) were envisaged for 2008. Thus, the main resources for the countryside development were directed to the solution of the housing problem. Will the mechanisms envisaged, including hypothecary crediting, be able to secure its solution The experience gained during the NPP allows answering this question.
In the course of the NPP the countryside population had two opportunities to improve their living conditions – to use the subsidy or to get a credit. The obstacle for the credit usage was the low level of wages. One of the experts taking pert in the monitoring of the execution of the National project commented it like this, “Today the most dramatic factor is not the absence of the housing but low wages.
Wages are low in agriculture throughout all Russia. If there were wages there would be new houses.
People cannot take credits with such wages. If you have salary of 30-50 thousand of rubles, you can take a credit, but it’s impossible if you’ve got 6-10 thousand. There are still the subsidies but this opportunity is much limited”. Agriculture productions, having difficult financial situation, usually refuse taking part in purchase or building housing for their workers. Another obstacle in the development of this direction of the NPP, according to the experts, is underestimated norm for the building of 1 sq m of the housing established by the Ministry for Regional Development of the Russian Federation, absence of the new housing market at the countryside and limited supply for the houses equip with the modern services and utilities at the secondary market.
The wages in the agriculture have been growing by anticipating rates for the third year in the row:
over January-September 2008 its growth was equal to 37.3%, whereas on the whole in the economy the wages went up by 28.7%. However at the same time average accrued wages in January-September 2008 made RUR 7883, which is 47.4% of the average wages in the economy. Minister for agriculture, A. Gordeev, holds that “the wages in the agriculture remains unacceptably low”16, but this situation does not change for quite a long time (fig. 1). The wages in the agriculture remains the lowest as compared with other kinds of the economic activity.
At the same time real average day length of working hours for the employees on the books of the agriculture organizations is the longest in the kinds of the economic activities (7.63 hours in JanuarySeptember 2008). However there are still few vacant positions in agriculture organizations: in JanuarySeptember their number was 1.2% of the number of the employees on the books by the end of the period (there were fewer positions only in education and fishing). The situation in the countryside labor market gives no grounds to be optimistic: the level of employment at the countryside is still low – in August 2008 it made 59.3% against 66.3% in towns. In August 2008 the employment in the informal sector of the economy among the inhabitants of the countryside was 33% of the total number of the employed people at the countryside (16% of the employed urban population in the urban areas).
The majority in the informal sector is occupied with the agriculture (30.3%) and trade (32.5%).
In August 2008 the share of the countryside inhabitants among the number of the unemployed made 39.4% (1.8 mln of people). In the total number of the unemployed in the countryside 0.7 mln of countryside inhabitants or 41.5% were in the situation of stagnant unemployment (looking for a job for months and more).
The efficiency in the agriculture organizations growing the population able to work is forced out to the wood processing sector or to the informal sector. Under such conditions at the agriculture labor market the wages in the agriculture organizations cannot grow to a significant extent, which means the difficulties in the solution of the housing problem, since the low level of wages does not enable workers to get a credit for housing purchase. That is why it is the creation of the alternative employment that should be the focus of the countryside development policy, otherwise the outflow of the youth from the countryside will persist.
Out of 49 target indicators of the Program execution there are only three belonging to the sector “Steady development of the countryside”: “1. Housing put into commission and purchased by the citizens living in the countryside, including young families and young specialists, total, thousand sq m; 2.
Provision of the countryside inhabitants with drinkable water, %; 3. the level of the houses (flats) gasification with the net gas”. The target indicators of Program fulfillment are at least rigidly connected with the envisaged funds, which one cannot say about its main target.
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