2020 Russia–Saudi Arabia oil price war facts for kids
In early 2020, a big disagreement happened between Saudi Arabia and Russia about how much oil they should produce. This led to a "price war," where the price of oil dropped a lot. On March 8, 2020, oil prices fell sharply, with some types of oil losing more than a quarter of their value.
This price war started because the OPEC group, which includes Saudi Arabia, and Russia could not agree on how to deal with the falling demand for oil. Demand had dropped because of the 2019–20 coronavirus pandemic, as fewer people were traveling or working.
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What Was the Oil Price War?
The price war began when countries that produce a lot of oil, like Saudi Arabia and Russia, could not agree on how much oil to sell. Normally, when there is less demand for something, producers might make less of it to keep prices stable. But in March 2020, Russia did not want to cut its oil production. In response, Saudi Arabia decided to produce even more oil, and sell it at a lower price. This made the price of oil fall very quickly.
Why Did Oil Prices Fall So Much?
Oil prices were already going down before the price war started. This was because the 2019–20 coronavirus pandemic meant that many countries were in lockdown. People were not driving cars, flying planes, or going to work as much. This meant the world needed much less oil.
When Saudi Arabia and Russia started selling a lot of oil at lower prices, it made the problem even worse. There was too much oil available, and not enough people wanting to buy it.
How Low Did Prices Go?
The price of oil kept falling. By March 18, 2020, oil prices were the lowest they had been in 17 years. On April 20, 2020, something very unusual happened: the price of some oil even went below zero! This meant that sellers were actually paying buyers to take the oil, because there was nowhere to store it all.
Impact on the World
The sudden drop in oil prices had a big effect on the world economy.
- Stock Markets: The fall in oil prices was one reason why stock markets around the world crashed on March 9, 2020. This day became known as Black Monday.
- Oil Companies: Many oil companies faced big problems because they could not sell their oil for a good price. Some companies lost a lot of money, and some even went out of business.
- Countries that Produce Oil: Countries that rely on selling oil for their income, like Russia and Saudi Arabia, also faced financial challenges.
The oil price war showed how connected the world economy is, and how events like a pandemic can quickly change the demand for important resources like oil.
Images for kids
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Movement of WTI price from 2019. On 20 April 2020, prices dropped below zero for the first time.
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Oil prices for selected North American benchmarks in the spring of 2020
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Oil prices per barrel needed for OPEC countries to balance their budgets (in US dollars)
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See also
In Spanish: Guerra de precios del petróleo entre Rusia y Arabia Saudita de 2020 para niños
