Why oil prices are crashing and what it means

 

Trading at around $30 per barrel, oil prices are at low points not experienced since the Gulf War in the early 90's.  The sharp decline in prices is attributed to a number of factors that are affecting the global economy as a whole. Chief of these factors is the current oil price war spearheaded by the Kingdom of Saudi Arabia and Russia. Negotiations between the OPEC+ (which is an alliance between the OPEC nations and Russia) to control the falling prices of oil, failed when Russia refused to cut down production in an effort to manage the price drop. Russia opposed cutting down it's production primarily because of it's own war against the United State's shale oil industry. Russia believes reducing OPEC+ oil production would be favorable to the American oil producers and decided to pull out of the alliance. Saudi Arabia retaliated against Russia's decision by increasing it's own production which worsened the already low price situation caused in part by the drastic drop in oil demand from China due to the current corona virus pandemic. Much as the reduced prices will give relief to consumer nations such as Germany, China and India, the lower prices are expected to most negatively affect nations whose economies are heavily dependent on oil such as Libya, Iran and Venezuela.

Source: https://www.cnn.com/2020/03/09/business/oil-price-crash-explainer/index.html

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