Making Sense of the Saudi-Russia Oil Price War
PUBLIC JURIST
In March, following a reportedly angry phone call between Saudi Arabia’s de facto leader, Mohammed bin Salman, and Russian President Vladimir Putin took place, the Saudis announced they would be both increasing their country’s oil production and cutting prices.[1] The response was swift. Oil prices halved overnight, from around $50 per barrel to $20 per barrel.
The world watched on with incredulity. For one, the Saudi move was a reversal to its longstanding preference to limit production in order to bolster oil prices. The decision mattered greatly, since Russia and Saudi Arabia are two of the largest oil producers and exporters in the world.
At the same time, the Saudi decision to pump more came at exactly the same time that the coronavirus pandemic was gaining steam. Countries around the world were obliging their citizens to stay home to prevent transmission ad shuttering their economies, reducing demand. The IMF, which had forecast the global economy to grow by 3.3 percent in 2020, revised their predictions downwards. Instead, at the beginning of April they anticipated a global economic contraction of 3 percent.[2]
