In case you were not aware, in the last days (and in the past month) the prices of the barrel of oil have plummeted in a monumental way, as has never been seen in recent years and although there is a great reason why it is not the only one.
Last Monday, March 9, was the day that oil prices suffered their biggest drop since the day in 1991 when United States forces launched airstrikes against Iraq troops after their invasion of Kuwait.
If you are thinking that the main reason for its collapse is the terrible pandemic that we are suffering as humanity caused by the Covid-19 Coronavirus, then you are wrong although it happened in the middle of this pandemic so its impact increased.
But in itself, why did prices plummet?
It was all because Saudi Arabia launched a price war that weekend. Saudi Arabia is the main oil-exporting region in the world. This price war coupled with the measure that followed the implosion of an alliance between the OPEP cartel, led by Saudi Arabia and Russia, was the cause of such a collapse.
The disintegration of OPEC +, Russia and other oil-producing countries put an end to more than three years of cooperation in the oil market and marks the beginning of a new price war.
However, the role played by the Coronavirus in all of this has also affected these prices, as it has undermined the demand for this hydrocarbon throughout the world, especially in China, which is the country that consumes the most energy in the world, taking first place in the import of crude oil by consuming approximately 10 million barrels daily.
The companies have been detained in China and around the world, the flights have been canceled and a host of measures have been taken that have been counterproductive against the commercialization of the hydrocarbon.
According to CNN, "The International Energy Agency said Monday that it expects demand to contract this year for the first time since the 2009 recession that followed the global financial crisis." All this due to the pandemic.
There are three regions in Latin America that have been most affected by this event and they are Venezuela, Colombia, and Ecuador
In Venezuela, "The sanctions imposed by the United States, the drop in local production and now the drop in prices in international markets are causing a lethal combination for Venezuela," says Monaldi.
It is known that 90% of this country's exports are from oil, which means that it is the main income that this nation has. But, the collapse in prices could mean a drop in income like no other.
On the other hand, Colombia has been equally affected because crude has become the main source of foreign currency income for the country in the last two decades.
In these last two decades, the economy of this country grew exponentially thanks to the high consumption of hydrocarbon, which now with the increase in the dollar and the possible increase in inflation may stagnate.
In Ecuador, the scenario is not very different from that of the latter mentioned country, with the fall in oil prices, the country is in a very complicated situation because it must honor its debts with the International Monetary Fund, and at the same time, it risks political imbalance if it decides to cut subsidies or social programs.
Then you will have to decide whether to go into debt or cut public spending, any decision brings consequences that were not expected.
For the rest of Latin America the complex situation is also seen, as would be the case of Mexico, PEMEX (the world's most indebted oil company), which thanks to this situation receives a new hard blow. And in the case of Brazil and Argentina, although they are also oil producers and exporters, the damage would not be so serious because they have diverse incomes that do not depend on this item.
The only ones that would benefit are the importing countries who will be able to acquire it at lower prices.
Time will tell about the direction that everything is taking and the decisions made by the great powers. What other consequences do you think are triggered by the collapse of oil prices?