A report on “Why oil prices are crashing and

trade war between Saudi and Russia”

-Gourav
Shrivastava

Why are oil prices crashing?

This all started because of disagreement between the Russian

federation and the OPEC nations which is leaded by the Saudi Arabia. That
deal was finalised in 2018 in which both the countries agreed to cut oil
production in future whenever necessary. But in this year when the OPEC
nations were deciding to cut the oil production Russia denied to denied to
so, stating the reason that they want to analyse the current situation of
market, impact of corona virus in the world, and how it is going to affect
thee demand of crude oil in the world.
OPEC nations considered it as a breach of contract and as to taught lesion
to Russia they announced that they would sell oil at a discounted rate and
will increase the production of oil, which had a cascading effect all around
the globe for the petroleum product prices

In a single day the prices dropped by almost 30$ and it was one of the
biggest drop till date, a drop by almost 31%. According to the report
published by FORBES, it is found that Russia is losing at least 100$ Million
dollar per day, and if this price war lasted even for 10 days, Russia will
suffer a loss of 1 Billion Dollar.

Impact on India
India being an oil importing country who’s FY 19’s import bill was of 112$
billion and estimated 105$ for FY20,Could save 22 billion dollar, oil prices
at this stage will help India control its current account deficit and make the
rupee stronger. 
If the crude oil prices continue to remain low, India could see its overall
import bill come down. For each drop of a dollar in crude prices, India’s
import bill comes down by almost Rs 3,000 crore.
This price drop might not give a direct benefit to the people as the
government would try to balance their fiscal deficit, but a minute cut can be
expected by the government in the petroleum prices.

Countries which will be affected most

Russia will itself suffer a big loss because of this issue, currently
economy is not in such a good condition in which they can handle this for a
long time. Oil dependent states that have suffered from years of conflict,
uprisings or sanctions will pay the heaviest price. Iraq, Iran, Libya and
Venezuela all belong in that category.

What does coronavirus have to do with all of this?

The coronavirus has weakened energy demand all over the world,
but especially in China, which is now the number one importer of crude oil,
accounting for around 10 million barrels a day. Factories have become
inactive and thousands of flights have been cancelled across the world
which resulted in the demand of petroleum products
The International Energy Agency reported on Monday that it expected
demand to fall this year for the first time since the stagnation of 2009 after
the global financial crisis.

--------------------------------------------xxxx----------------------------------------------