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Listen "The Reason Behind Oil Price Crash"
Episode Synopsis
What caused the second biggest oil crash in the history?
On Monday, 9th of march, crude oil prices saw the second biggest crash in the history post the 1991 war
between US and Iraq. Prices of oil on Monday fell as much as 30% to hit a low of nearly 30$ per barrel.
The main reason for the was the price war launched by OPEC countries on Russia. But how did it all
start?
In 2015-16 the crude oil prices dropped from over 120$ to less than 30$ per barrel in a short span after
The US discovered the shale gas. This was the time when the two major oil producers OPEC and Russia
entered into an alliance called the OPEC+, here they decided to cut down the oil production to 2.2(not
really sure if it is 2.2 or 2.5) million barrels per day. This helped oil bounce back to price levels of around
55-65$ per barrel. They laid a road map of slowing increasing it to 3.6(again not sure, some where
around this range) million barrels per day by end of 2020-21 maintaining the price stability.
On Friday, during the OPEC+ meeting which took place in Austria, Russia was very clear on breaking the
alliance and coming out of it. Russia believed cutting down production would give a great chance to US
to increase it's market share in the oil industry due to US filling gap between the demand and supply
through shale oil production.
On the other hand after Russia broke the alliance, Saudi Price launched a price war against Russia by
cutting the prices by 4-6$ per barrel to gain the highest market share and dominate the oil industry.
This triggered uncertainties and fear over the actions which may follow by the oil producing nations and
sent the crude prices tumbling down to 33$ per barrel which is almost 30% down over night.
How will India benefit out of this?
India is a major oil importer. It approximately saves $10billion or Rs. 70000 crores on every $5 fall in
crude oil prices.
The recent fall where crude prices fell almost $14 per barrel will help india save close to Rs. 2 trillion,
which will give the government a chance to reduce its fiscal deficit by a pretty good margin.
On Monday, 9th of march, crude oil prices saw the second biggest crash in the history post the 1991 war
between US and Iraq. Prices of oil on Monday fell as much as 30% to hit a low of nearly 30$ per barrel.
The main reason for the was the price war launched by OPEC countries on Russia. But how did it all
start?
In 2015-16 the crude oil prices dropped from over 120$ to less than 30$ per barrel in a short span after
The US discovered the shale gas. This was the time when the two major oil producers OPEC and Russia
entered into an alliance called the OPEC+, here they decided to cut down the oil production to 2.2(not
really sure if it is 2.2 or 2.5) million barrels per day. This helped oil bounce back to price levels of around
55-65$ per barrel. They laid a road map of slowing increasing it to 3.6(again not sure, some where
around this range) million barrels per day by end of 2020-21 maintaining the price stability.
On Friday, during the OPEC+ meeting which took place in Austria, Russia was very clear on breaking the
alliance and coming out of it. Russia believed cutting down production would give a great chance to US
to increase it's market share in the oil industry due to US filling gap between the demand and supply
through shale oil production.
On the other hand after Russia broke the alliance, Saudi Price launched a price war against Russia by
cutting the prices by 4-6$ per barrel to gain the highest market share and dominate the oil industry.
This triggered uncertainties and fear over the actions which may follow by the oil producing nations and
sent the crude prices tumbling down to 33$ per barrel which is almost 30% down over night.
How will India benefit out of this?
India is a major oil importer. It approximately saves $10billion or Rs. 70000 crores on every $5 fall in
crude oil prices.
The recent fall where crude prices fell almost $14 per barrel will help india save close to Rs. 2 trillion,
which will give the government a chance to reduce its fiscal deficit by a pretty good margin.
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