Crude Oil & Coronavirus Stir Economic Unrest Around The World
Due to the novel coronavirus scare, an unprecedented global economic crisis has taken shape.
Video Editor: Mohd Irshad Alam
Due to the novel coronavirus scare, an unprecedented global economic crisis has taken shape. It’s such a huge global disruption that we’re unable to find a term to describe this — do we call it a bloodbath, a big shock?
The Big Developments
On Friday, Saudi Arabia slashed crude oil prices, a price drop of 35%, with oil worth around USD 30. The background is that everyone had a problem with the supply chain disruption caused by the coronavirus outbreak. Then Russia and Saudi Arabia — major oil-producing countries — sat together to have a discussion over the crude oil prices.
The two countries could not come to an agreement, and began a price war. Russia said they would not reduce the prices, but Saudi Arabia drastically cut its prices.
Remember, there’s discord going on in Saudi Arabia right now. Two princes have been locked up in jail at the orders of Saudi Crown Prince — how this relates to Saudi Arabia’s internal politics is another matter, but what is the effect?
The ‘Historic’ Sequence Of Events...
The US Treasury Bond — that’s of 10 years — has hit a historic low and its yield is below 0.5%. The 30-year treasury bond’s yield has gone below 1%. The danger is that the entire US economy could go into a negative interest rate zone.
This is such a huge shock that all the stock markets across the world have plummeted, and India’s is one. The relationship between oil and Dollar has also been weakened. The Dollar has grown stronger against the Rupee, but is still weak against the Yen, due to which investors have become restless and are looking for a safe haven – gold.
So, here’s where we are: Gold prices have increased, there’s still trouble with the Dollar, and we’ve just seen the bond yields and what a bloodbath followed at Dow Jones along with other share markets.
An oil price war essentially means that Saudi Arabia and Russia will now create problems for the US. When it came to crude oil, the US at one time was a net importer, but it has since become a net exporter, selling shale gas to other countries at a huge scale – the price of that too has fallen below $30.
Donald Trump Is Busy With Election Preparations
The United States is looking forward to elections and Donald Trump is busy with the election preparations. Trump calls himself the ‘deal maker’ but will he be able to find a deal to get out of this crisis? Will he be able to solve it calling up Russia, Saudi, Iran and other OPEC countries?
For the complete analysis, watch the video.
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