The global economic network has witnessed the greatest depression in the prices of crude oil since the Gulf War in 1991. Oil prices drop 31% as global economy crashes as a consequence of the outbreak of the global pandemic of Coronavirus. A price combat between Russia and Saudi Arabia is also contributing to the drastic decrease in oil price.
Abiding by the prospect of supply-free-for-all, Saudi Arabia and Russia have plunged into a war of supplying the world oil at very cheap rates. Saudi Arabia declared to the world that they had dropped their oil prices at a record low of at least 20 years. In addition to it, they also committed to the market that it will boost up the oil production and supply by exponential figures. Big oil companies even committed to supplying a whopping record of 12 million barrels a day at each barrel costing about $31.08.
This price drop has had a profound impact and can be felt resonating throughout the energy industry. The stupor in supply and demand has reverberated across stretches of time, options and sensitivity. A profitable company’s three-month price structure broadened sharply as oil for prompt delivery collapsed against later shipments. It moved deeper into backwardness, a sign of bearishness and oversupply, making it profitable for physical traders to buy crude and put it into storage, either in onshore tank farms or at sea on tankers.
Decrease in oil price is actually good news for Pakistan. As Pakistan is an oil importing country since the beginning, fluctuations in oil price affect many macroeconomic variables. High oil prices slow down economic growth, investment and international trade. For Pakistan, this price drop is like a breeze in the hellfire of inflation. Oil prices have proven to be crucial to the health of the economy of an oil importing country like Pakistan. When the oil price rises, it also raises individual and national expenses.