Wednesday, March 11th, Saudi Arabia flooded the global oil market with inexpensive crude oil, causing it to crash. This is a direct escalation in the oil fight which only started on March 8th when Saudi Arabia and the United Arab Emirates broke their global coalition with Russia. This price war has dropped oil prices 34% and crude oil prices by 26% in America. The global oil reserves will be greatly impacted by this and at the current rate of consumption the supply might only last 43 years. Saudi Arabia is hoping to replace Russian oil in countries like India and China since they’re large oil consumers, they have also started to provide more crude oil to Europe.
With the current coronavirus pandemic, oil prices have decreased by 50% and Russia has been lagging in reaching a new deal regarding supply cuts. Moscow, Russia’s capital, appears to not be worried and hasn’t budged on new cuts and continues to pump more oil.
Saudi ally, the United Arab Emirates, has also announced increases in production and has a deep cut in prices compared to Russia. Despite the additional threat, Russia has no plans on negotiating with Saudi Arabia and has not acknowledged the pressure they are facing.
Saudi Arabia’s artificially lowered costs come with a price: the possibility of needing to borrow money to fill the gap between profit and cost.
The oil price war only worsens during the coronavirus pandemic, with the disease originating from China it caused the nation to dramatically decrease oil use. The combination of COVID-19 spreading rapidly and the oil war has resulted in the global economy dropping.