The Saudi Arabia-Russia oil war, explained in 175 words. Yesterday, they had their largest single-day drop since 1991. Why? OPEC couldn’t convince Russia to cut production amid a decrease in global demand due to the coronavirus.
Wtf is OPEC?
It’s the Organization of the Petroleum Exporting Countries. It’s a group of 14 countries that together produce almost half of the world’s crude oil (Mideast countries like Iran, Saudi Arabia, Iraq, African nations like Algeria, Angola, Congo, and others like Venezuela.
To keep oil prices stable by coordinating on policies and how much oil they produce at one time. For example, if they produce a lot of oil and there’s not enough demand, prices go down (and viceversa).
So what happened now?
OPEC proposed reducing oil production as demand is in decline (think: coronavirus). The problem. Russia (a major oil producer & OPEC’s ally) said no (we still don’t know why).
The consequence: oil price war.
Saudi Arabia didn’t take too kindly to Russia’s decision and responded by slashing its export prices to start a price war with Russia (this way, countries would prefer to buy Saudi’s oil).