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Impact Of Energy Subsidy On The Global Markets

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Abhishek Biswas, Jonathan Broch, Neeraj Datta, Bartosz Konopka & Jaynth Thiagarajan
Impact of Energy Subsidy in Russia
Russia is an energy-producing powerhouse whose economic performance is largely correlated with the fluctuations in the general commodities sector. According to the U.S. Energy Information Administration’s (“EIA) analysis brief on Russia, the country derived 52% of its federal government revenues from oil and gas production, which also accounted for over 70% of all Russian exports in 2012. Russia is the world’s second largest producer of natural gas and third largest producer of oil. Domestic energy consumption is dominated by natural gas, which, according to the EIA’s
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This paper will address these general observations as they pertain to Russia. The aim will be to identify and quantify the benefits as well as negative consequences of Russia’s natural gas subsidies and conclude with an opinion as to their effectiveness and the alternatives available to the current policy.
Introduction - Russia’s Energy Sector and Subsidy Program at a glance
As mentioned earlier, Russia is the world’s 3rd largest producer of oil and 2nd largest producer of natural gas, with the largest known natural gas reserves in the world. 2012 oil production stood at 10.4m barrels per day (bbl/d), of which approximately 3.2m bbl/d were consumed domestically and the rest was exported. Though Russia’s oil production is concentrated in the Western Siberia and Urals-Volga region (85% of all production in 2012), exploration is now shifting to the under-developed Eastern Siberian areas as well as the Arctic Circle. Oil production is dominated by domestic companies, led by the state-controlled Rosneft, which after acquiring virtually all of the assets from the Yukos liquidation as well as the assets from another major competitor, TNK-BP, now
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