One chart that explains why Russia’s currency is collapsing

The Russian ruble fell to a new low against major world currencies overnight.

A major factor has been oil prices. The price of oil has dropped enormously since the beginning of November with great consequences for the American economy but bad consequences for oil-exporting nations.

Russia is a major oil exporter, and its economy has been one of the hardest-hit by the price slide. The ruble is now the worst-performing currency of 2014 — below even Ukraine’s battered hryvnia. In a desperate effort to prop the currency up, Russia’s central bank hiked interest rates from 10.5 percent to 17 percent to try to tempt foreign investors to buy ruble-denominated assets even at the price of a potentially devastating recession.

For any oil-dependent country, the ability to weather a price decline ends up largely coming down to how much foreign currency reserves you built up when the going was good. Russia has a big stockpile — not as big as Saudi Arabia’s (they have over $700 billion) but bigger than the other Gulf states — but it’s falling fast:

For context, even at the depths of the 2008 recession (which caused world oil prices to tank, among other things) Russia’s reserves never fell as low as they stood at the end of November. Over the past two weeks, the price of oil has only kept tumbling so there’s no reason to expect this trend to turn around.

On some level, this is what the Great Ruble Meltdown is all about. Currency traders seem to be betting that at this pace Russia will run out of reserves before oil prices get high again.