Impact of oil on the world economy

The fall in oil prices has several consequences. This leads to job losses in the oil industry, and oil-related companies are forced to cut costs - or go out of business. More than three dozen large companies in the world have already filed for bankruptcy.

Oil also plays a large role in international politics. Saudi Arabia, the second largest oil producer in the world (after the US), is also one of the lowest cost producers. They can extract oil from the ground for less than $ 10 a barrel. At the same time, it is estimated from $ 30 to $ 40 per barrel in the United States, and more in other regions.

Thus, Saudi Arabia still has a lot of leverage over oil prices. When prices fell, they cut production to reduce supply and raise prices back. But not this time, at least not until now.

Saudi Arabia has several incentives to keep prices low. The country is a tough political and religious adversary to Iran, which will have the opportunity to increase oil production after the sanctions were lifted. In addition, Russia has entered into an alliance with Iran and Syria, another adversary of the Saudi. All three oil producing countries whose economies rely on oil revenues. Saudi Arabia wants to squeeze out their financial resources while keeping prices low.

The flip side of cheap oil is, of course, consumers and businesses. Large investors have taken advantage of the situation and injected savings into the American economy. But oil is priced in dollars, so low oil prices have less of an impact in countries with weaker currencies like China, Canada, some eurozone countries and others.
In addition, oil is also a major source of income for ISIS in the territories they have occupied.