The world has already witnessed the shattering effects of newly-emerged coronavirus. Covid-19 has impacted economies around the world; stock and oil prices fell considerably. A lot of important events were canceled or postponed. Even two massive sports events such as Euro 2020 and Tokyo Olympics 2020 have been pushed forward, so it is obvious what the virus has brought to the countries.
Oil prices fell heavily. It has been the most when in 1991, US forces launched an attack on Sadam Hussain’s troops after the latter had invaded Kuwait. Russia and Saudi Arabia are entrenched in the oil price war, and this article will talk about this issue.
Why are oil prices crashing?
If you were to ask what is the main driver behind oil prices falling, there could be several answers which are: Saudi Arabia, Russia, the United States, Coronavirus. All of them are entirely possible, and you can say that each of these factors in connection with each other, caused the crisis.
But the main reason we can mention here is the rift between the members of OPEC alliance Russia and Saudi Arabia. The latter asked Russia to cut production to stabilize prices, which was met negatively from the Russian side, thus inflaming the situation further.
The oil price is currently below $30. Russia, whose economy mostly depends on the oil price, is in a difficult situation. A lot of countries, affected by the falling prices, managed to ‘wake up’. They are contemplating diversifying the economy. Gambling industry is very handy in this situation because Georgia(country) for example, where gambling is legal, a lot of casinos make revenue. People try to win real money at online casino games, and these casinos become increasingly popular in the country, which is beneficial for the economy. Not only it concerns oil prices but any other sector. A country should not rely on a particular field, which is considered to be the primary source of revenue. Unexpected things happen all the time, so having a diversified economy is the key to success.
Why do we have to blame coronavirus?
As plenty of factories and enterprises stopped working especially in China, the energy demand worldwide has diminished significantly. Factories have become idle, thousands of flights canceled over the fears about coronavirus. The International Energy Agency declared that we see some parallels with the 2009 financial crisis.
Oil slump proves to be a counter-intuitive thing. It is very hard to determine when it happens or what is the main driver behind it. Falling prices hurt a lot of countries that depend on oil. For instance, Venezuela and Nicolas Maduro could see a major decline. Russia has already plenty of sanctions imposed following the annexation of the Crimean Peninsula in 2014 from Western countries and the current situation only makes matters worse.
So what can we expect? Right now, when the virus is roaming around the world, it seems unlikely to look for any silver lining, but as soon as Covid-19 reduces in intensity, everything will go back to normal.