FINANCIAL RISKS OF RUSSIAN OIL COMPANIES IN CONDITIONS OF VOLATILITY OF GLOBAL OIL PRICES

Sergey O Chikunov,Irina V Osinovskaya,Alexander A Sokolov,Andrey S Pozdnyaev,Marina I Ivleva,Vadim V Ponkratov

doi:10.32479/ijeep.7358

Abstract

The development of scientific approaches to assessing and diagnosing the financial risks of oil industry in the Russian Federation becomes a high priority task in conditions of high level of volatility in oil prices in the world energy market and preservation of sanctions regime. The article shows the main threats to financial stability of oil companies in Russia. Using cluster analysis, a system of indicators is proposed that determines the level of financial risk of oil companies in Russia. Based on the method of expert assessments and fuzzy sets, the classification of financial risk levels of oil industry is proposed. The integrated financial risk level of oil industry was calculated and scenarios of its development for 2018–2020 were forecast by means of regression modeling. The system of measures to improve the stability of oil companies and prevent functional financial risks is argued. The practical implementation of research results will be the basis for timely diagnosis of financial risks and qualitative development of preventive measures to neutralize them in the oil industry of Russia.Keywords: Oil Industry, Oil Companies, Financial Risks, Oil Prices, Financial Stability of Oil IndustryJEL Classifications: Q43; Q41; G32; L52DOI: https://doi.org/10.32479/ijeep.7358

Highlights

Russia ranks sixth in the world as to oil reserves
Despite the fact that Urals crude oil is mainly produced in the Russian Federation, the prices for petroleum products are influenced by the world level of prices for Brent crude oil (Investing.com, 2018)
The increase in world oil prices leads to increase in net exports, budget revenues and Russia’s gross domestic product (GDP), while decrease causes reduction in foreign exchange earnings and decrease in GDP

Summary

Introduction

Russia ranks sixth in the world as to oil reserves. Overall, the country’s total oil reserves are estimated at 106.2 billion barrels of oil (BP Energy Economics, 2017). Russian oil exports increased by 7.3% during 2013-2017 (ME RF, 2018) These trends demonstrate the financial stability of the Russian oil industry. There are significant financial risks - volatility of worldwide oil prices - which in the long run, can destructively affect the stability of oil industry in Russia. The more unpredictable raw materials prices are, the more actively investments in long-term projects are limited, focusing on projects designed to extract profits in the short term as less exposed to financial risks. This trend eliminates the promising possibility of active investment in long-term exploration of new oil fields. Taking into account the fact that today the volume of proven extracted oil

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