Why price of crude oil falling? Which country will be most affected?

 Fall in oil prices is now headline of world economy. Some people are saying that it is a secret war between USA and Russia while another are trying to prove this is just because of excess supply. What is real purpose? I will try to answer in this article.


For almost 1 year, price of crude oil was between $95 and $105 and it was expecting to continue like this until 2016. However, after it peaked at June 2014 to $105,47, it sharply fall to $82,97 in October 2014. Now everyone is writing conspiracy theories about that, but what is the `real` reason?

One of the main reason is of course excess supply. As known from economics 101, if the supply increase price will be lower. So why supply increase?  After civil war,Libya started to supply crude oil again but in 2012 new civil war just started between Libya's rebels and oil production stopped. But now Libya joined the petroleum league again which increases the supply. Also, USA is producing record-level crude oil in 2013 and 2014 which will directly affect the supply of crude oil, because they are the second biggest oil producer in the world after Saudi Arabia. 

Moreover, according to reports; European and Asian demand for crude oil is decreasing which will decrease price also. (Again Economics 101; what a useful lesson it was) But this theory is only based on few countries in Europe and Asia so we can not directly say that it is the real reason.

Fall in oil prices will affect every country positively and negatively. If you are dependent on oil import (Like Europe), fall in oil price will not affect you badly mostly. But the main subject of this article is opposite situation like Russia and Iran.
Russia

To start with, How important is exporting oil in Russia's economy? I can easily say that, SO important because almost more than 40 percent of Russia's economy is dependent on oil revenues. Therefore, logically fall in oil prices means fall in oil revenues and fall in Russia's GDP. 

However, Russia's authorities are saying that this is not a problem for Russia's economy because Russia has 30 billion $ budget surplus which will help them to fight with that prices. Despite the fact that, Russia's economy is growing just %0.4, Russian authorities don't see any problem. (Did I mention also ruble is losing against dollar?)Can this cause Russia to pull-back from Ukraine? I don't think so. But we can see Russia as a building which is on Gas and Oil Industry, if they crack little bit more, the building will not survive so long with this aggressiveness. 

Iran

Iran's economy is trying to get up and fight against Western sanctions. Their most strongest weapon in this fight is... YES crude oil. Crude oil's price has to be between $95-$105 for Iran to fight against budget deficit. Expensive Crude oil is also making Iran's hand more powerful in political situations (such as Nuclear Weapon Agreement etc.) against West. Therefore, Iran needs oil prices got higher to continue stable as economical and political.

Conclusion

Both Russia and Iran is losing the game in this situation. Of course there will be a lot of theories whether it is USA's plan or not. But it seems like USA and Saudi Arabia want to give lesson to Russia and Iran who is politically against them in almost every subject (Syria, Ukraine, Libya, Egypt...) Saudi Arabia and USA's economy strong enough to fight against $80 per barrel price but as can be seen we can not say the same thing for Iran and Russia. So now it is time to think for Putin, because Soviet Russia collapsed after 1980's falling in Oil Prices. Will Putin let this problem to threat mother Russia?  What will be his new policy? We will see..