Topic Reading-Vol.2903-3/23/2020

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Topic Reading-Vol.2903-3/23/2020

英語で世界を知ろう!Topic Reading

2020/03/23 Topic Reading-Vol.2903-3/23/2020

Dear MEL Topic Readers,

Saudi Arabia has launched the ultimate oil power play.

Never initiate a price war unless you’re the lowest cost player. A golden rule for any business. Though the world is shifting from fossil fuels to renewable energies, oil still is the major source of energy. Without oil, cars won’t drive, ships won’t sail, and airplanes won’t fly. Of the roughly 80 million barrels of crude oil produced daily, the US produces 15 million, Saudi Arabia 12, and Russia 10. So, any of these three giants has a significant impact on oil supply and prices in the world. Now, Saudi Arabia initiated a price war by increasing production, and the crude oil prices slide to $20 per barrel, which had been fluctuating between $40 and $60 per barrel for the last five years.

How could the kingdom do that? Is the cost to produce and ship oil significantly cheaper than the US or Russia? Actually, yes. Wall Street Journal estimated the average cost for a barrel of oil in the US and Russia are around $20 while that of Saudi Arabia is less than $10. Half the cost!

However inexpensive their production cost might be, the lower the prices are, the less profitable the supplier is going to be. So why a price war?

Enjoy reading the article and learn why a crude oil price war amid COVID-19 pandemic.

https://edition.cnn.com/2020/03/13/business/saudi-arabia-oil-markets/index.html

MEL School 三鷹
電話:0422-27-5366
住所 〒181-0013 東京都三鷹市下連雀3-33-13 三鷹第二ビル101
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