Reasons for Fall in Crude Oil Price in the World

    The Crude Oil prices have crashed drastically in the World a few months before the price of Crude Oil was $60 per barrel and now it has crashed to $20 per barrel. So, What is the reason behind this uncertain fall in the price of Crude Oil?

Fall in price of Crude Oil.

   
    The main reason behind this is the Oil price War between three powerful countries in the World namely Russia, Saudi Arabia and the United States of America. So, what exactly is this price war? And how will it benefit the other nations in the World?

    First of all, let us understand a small basic economic concept that most of us already know that the price of anything or any commodity depends upon the Demand and Supply. If the Demand is more and the Supply is less then the price will inflate and vice versa. The same concept goes with the Oil if the Demand is less and the Supply is more then the price will fall. Now, the top three oil-producing countries in the World are the USA, Russia and Saudi Arabia. It is to be known that the USA was earlier an Oil Importing country but after they discovered a new technique of Oil Drilling which was a combination of hydraulic fracturing and Horizontal drilling called 'Shale Oil' due to which it extracts more oil from existing oil fields in a more profitable manner, by the help of this new revolutionary technique the USA eventually became the oil-exporting country infact, became the number one oil-exporting country leaving behind Russia and Saudi Arabia.

USA Shale oil Drilling Technique.

   
   So, due to the production of 'Shale Oil', the supply of oil increased and the Oil prices fell, this meant that the profit of OPEC countries and Russia began to deteriorate. But today in this current scenario when the demand for oil is very less due to the pandemic of Covid-19 and lockdown in various countries, Russia feels that it can root out the private drilling companies of the USA from the competition and can capture back its market share in Oil Production and for that, it has increased its supply of Oil and because of that the prices of the Crude oil fell drastically. If this continues for a long time the private companies of the USA would become bankrupt and eventually shutdown. Basically, Russia is frustrated with the USA for various reasons like it has imposed various sanctions on Russia which is already having a lot of bad effects on their economy, so they see this as an opportunity and is taking its revenge on the USA, and are ready to bear the loss, for the time being, Russia feels it might be able to do what OPEC countries failed to do.

   But, the maximum benefit from this situation will be availed by the Oil Importing Countries like India, China, Japan etc. If we talk from the point of India, India spent $112 Billion to import oil in financial year 19-20, but if the prices remain same it is predicted that in the current financial year India will spend only around $64 Billion which means India will avail the benefit of approximately $60 Billion which is quite good for any developing country. So these are the main reasons behind the fall in crude prices in the World. I hope you would have found this article/Bolg informative if you did kindly share it with your friends and relatives and drop your feedback in the comments section.
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