Understanding the Implications of Increased Oil Production in Saudi Arabia


After failing to reach an agreement about oil production and falling costs of oil, Saudi Arabia and Russia left talks with an impending price war and the three-year OPEC alliance is undoubtedly in question.  Saudi Arabia made it clear that it was going to increase production and further announced stunning discounts on oil to the United States, Asia, and Europe.  While Russia is the target of these actions, Russia is not going to be the only entity affected by the increased oil production and discount prices. In the United States, consumers, as well as several key industries, will begin to see increased changes.


Less Pain at the Pump for Consumers

Consumers will likely benefit from the price war as it will allow them to see even lower prices at the pump. Average consumers will only see the improved gas prices, filling up as affordably as possible while not understanding the full scope of the situation.  While gas prices are cheap, stay at home orders may be affecting the average customers’ ability to take advantage of the prices.

Relief for Airlines

Much like the consumer, airlines will enjoy lower fuel prices.  COVID-19, also known as the Coronavirus, is having major impacts on airlines.  Because several countries have limited or banned travel altogether due to the virus, passenger travels are significantly down. These factors are leaving airlines with empty planes and dismal earnings.  Cheaper fuel will help them reduce their current operating costs and help them absorb the cost of doing business in a time where many consumers cannot or choose not to travel.

US Oil and Gas Production

With Saudi Arabia producing more oil and offering it at bargain prices, US oil and gas producers are going to feel the pain.  Essentially, supply is greater than demand and people will lose their jobs.  The impact, if this continues, can be drastic and far-reaching here at home.  On March 20, 2020, U.S West Texas Intermediate Crude futures dipped below $20 and on March 30th they dipped again to $19.90.  This is lower than oil prices have been in more than 17 years, causing the oil and gas industry to feel the pain far and wide.

Investment Uncertainty

Uncertain times result in erratic investment behaviors.  After the fall out between Russia and Saudi Arabia, oil prices dropped drastically.  Investors were already weary due to the impact of coronavirus on supply and demand, and subsequently the value of oil.  This price war has understandably, further spooked investors and resulted in a sharp sell-off.  Oil prices dropped 24% in one day, March 8th, signaling the beginning of the price war.

Asset Protection in Uncertain Times

Here at MSI Pipe Protection Technologies, we not only strive to bring you the highest quality pipe protection equipment but also seek to provide you with the most up-to-date and relevant industry news and information. During these turbulent times, we remain committed to supplying you with the best and most reliable protection for your valuable industry assets. Please contact us today or request free samples to see the levels of protection that MSI can help you achieve.

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