How India should respond to the global oil war
Global oil prices have crashed. WTI crude is trading at under $30 per barrel, after Saudi Arabia declared a war of attrition against other producers by opening its spigots to flood the market. Since its own output cost is very low, it can afford low prices while higher-cost players suffer losses. Riyadh’s aggression can be traced to its standoff with Russia, which on Friday appeared to snap ties with the Saudi-led Organization of Petroleum Exporting Countries (OPEC). Given the slump in oil demand caused by the outbreak of Covid-19, the oil cartel was pushing for coordinated supply cuts to reduce market supply and buoy prices. Moscow didn’t play ball, and so Riyadh appears keen to punish it.
Yet, all oil exporters are hurt by such a price crash, and so it’s not clear how long this war will last. Nor can anyone predict the economic ravages of Covid-19. Fuel usage has already gone into a tailspin as travel plans get called off, and a revival could take months on end.
