This is the fourth price war in the last 35 years, in which Riyadh is participating. All of them lasted at least a year, and prices eventually fell by no less than 50%.
Of course, this time everything could be different – never before has the shock of demand so coincided with the shock of supply. However, past wars at least demonstrate how high the pain threshold is for those who make decisions.
Here’s how events unfolded in the past:
• Price war I: 13 months. At a meeting in Et-Taif in Saudi Arabia in June 1985, King Fahd warned OPEC countries that his country would no longer alone bear the burden of reducing production. In November, Riyadh began to flood the market with oil. Prices for six months fell from $ 31 per barrel to $ 9.75. The world could not be concluded until December 1986.
• Price war II: 17 months. It began in November 1997 at a meeting in Jakarta, the capital of Indonesia. Saudi Arabia ramped up production to repel Venezuela, which was rapidly capturing the lucrative US market. True, Riyadh did not expect that amid a crisis in emerging markets and a warm winter, demand would collapse. Oil eventually fell from about $ 20 a barrel to less than $ 10. The parties reconciled only in April 1999.
• Price war III: 22 months. It began in November 2014 at a meeting in Vienna. Tired of the fact that non-OPEC countries enjoy the benefits of reducing cartel production and worrying about the consequences of the American shale revolution, Saudi Arabia decided to pump oil at its discretion. Oil fell from about $ 100 a barrel to $ 27.88. The world was concluded in September 2016: Riyadh retreated, and Russia joined the reduction in production.
This time the battle was fiercer from the start, with prices dropping more than 35% in a matter of days. Previously, prices fell slowly over the months. The new shock tactics of Riyadh, perhaps this time will reduce the conflict – if it turns out to be so painful that everyone will be forced to quickly sit at the negotiating table.
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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.