World markets tumbled Monday as oil prices fell more than 30% in Asia, an extremely severe drop linked to the Covid-19 epidemic.
“Something very serious can happen” in the global economy, said on March 9th on franceinfo Matthieu Auzanneau, director of the energy transition think-tank the Shift Project. Saudi Arabia has unleashed “a price war”, especially with Russia, causing a drop in oil prices and a plunge in stock markets worldwide on Monday. “We can expect a drop in prices at the pump, if the drop in crude prices continues”, according to Matthieu Auzanneau.
franceinfo: Is this good or bad news?
Matthieu Auzanneau: It depends for whom. For the motorist if we look at the very short term, we will probably not go towards an increase in prices at the pump, or even we will have a decline. Pump prices may drop if crude oil prices continue to drop in the coming weeks. Now, you have to understand that oil is a bit like the blood system of the world economy and that violent shocks in one direction, in another on the oil economy, it always has consequences which are rather deleterious for all global economic activity.
We have seen, for example, the collapse of BNP Paribas, Crédit Agricole and Société Générale shares. Why are world markets experiencing such a fall?
The petroleum industry is by far the largest industry in the world. So that means a lot of capital invested. So as long as we have not learned to do without this oil, an oil industry which is not doing well, it does have consequences for the banks, for the financiers. And then there is a whole geostrategic component. There, we have an open economic war between Saudi Arabia and Russia, which are the two largest producers of oil with the United States. We see the tensions around the Persian Gulf, which is already heated to white.
Mr. Putin has just been publicly humiliated by Mohammed ben Salmane. We can expect to have repercussions.at franceinfo
In fact, Saudi Arabia has just launched a kind of royal battle for oil producers, a price war in which Saudi Arabia has the most beautiful oil reserves, the lowest cost of production and has the sovereign wealth. richer. It challenges not only the Russians, but all the other major producing countries to keep it high. She challenges Vladimir Putin to return to the OPEC (Organization of Petroleum Exporting Countries) negotiating table. I am not at all certain that Mr. Putin is letting his arm be twisted by Mohammed bin Salman and the sovereign clan of Saudi Arabia.
How long can this showdown last?
Not only can it last a long time, but in addition Russia and the sphere of influence to which Saudi Arabia belongs are playing a war by enemy interposed in Syria. It can very easily extend, but also fester. Global demand for oil is very low today due to the coronavirus. We really have conditions where a little everyone is back to the wall. We are potentially faced with a situation comparable to that which we experienced in the 1980s, during the oil counter-shock, which is a historic moment. Something very serious can happen.
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