Falling Oil Prices: Great for Consumers, Bad for Russian Economy

While falling prices at the gas pump may be a boon for everyday consumers, fluctuations in the price of gasoline can have very real consequences for nations such as Russia, the second largest exporter of oil in the world. Muhammad Najib ’18, along with Visiting Assistant Professor of Economics Onur Sapci, is this summer attempting to assess the impacts that falling oil prices have had and will continue to have upon the Russia’s economy, politics and macroeconomic policy decisions.

Najib’s research will analyze myriad factors relating to the effects of the recent oil shocks on Russia, ranging from strictly economic impacts such as changes in GDP growth, inflation, interest rates and investment levels, as well as political facets, from government policy actions on various oil price levels to the complicated implications of Western economic sanctions on the nation.

The project also seeks to assess structural flaws in the Russian economy that lend it to overdependence on petroleum exports. These factors include the lack of free market competition in the Russian economy, the dearth of well-established property laws, the presence of massive state corruption, and the lack of recent technological innovation in the manufacturing and oil industries.

Identifying these issues, however, is less important than addressing the ways in which Russia can reverse the damages done by the recent oil shocks, and help prevent similar shocks from having such devastating impacts in the future. “There is a need for stronger, more concrete measures targeting structural flaws (within Russia),” said Najib.

Those measures, he claimed, could range from reducing and removing the legal hurdles to foreign investment characteristic of the Russian bureaucracy, to promoting innovation in manufacturing and oil production, as well as implementing desperately needed crackdowns on corruption within the goliath state. Should substantive action not be taken, argued Najib, recent advancements within Russia could be put in jeopardy, such as the rapid decrease in the percentage of the population living in statistical poverty.

As a rising sophomore, Najib remarked that this project has provided an invaluable learning experience, both on the topic of the Russian oil industry, and more broadly on the processes surrounding collegiate and professional research. “(This research) has a personal significance to me in the sense that it will help me get acclimated to the research methods, strategies and expectations related to (this type of) work,” he said. “It will also help me to understand the history of the oil crisis in-depth, its impact on political relations between countries, and how economic crisis ought to be dealt with.”

He concluded by espousing the importance of research to developing the methodological skills necessary for success in the field of economics, saying that through this experience he has “learned how to review large amounts of data, to analyze a huge number of facts and figures, and how to condense that information into the form of an academic paper.”

Najib’s research with Sapci is supported by an Emerson Summer Collaborative Research Award.