Oil price war will fuel bigger economic crisis

Concerns over the novel coronavirus epidemic's global spread had a ripple effect on crude oil prices, which plunged nearly 30 percent at the start of trading on Monday, the biggest one-day drop since the US invasion of Iraq in 1991. Even the US crude oil price on the West Texas Intermediate, the main oil benchmark for North America, was close to its lowest level at $30 per barrel.

As the epidemic spreads across Europe, the already fragile world economy could be staring at a recession. The epidemic has triggered an oil demand crisis, although that was expected. Strict measures to control the epidemic in China slowed further deterioration of the crisis to some extent. The dip in oil prices this time has been triggered not by a demand but a supply crisis, after the Organization of Petroleum Exporting Countries and Russia got into a tiff over whether to further cut oil production to deal with the drop in demand.

At the Vienna meeting on Friday, Russia did not agree to further production cuts, causing international oil prices to fall by more than 10 percent that day, triggering a supply crisis. Saudi Arabia then launched a price war by slashing its official crude oil sales price for April by the largest margin in at least two decades. It also announced a plan to increase its oil output to more than 10 million barrels a day next month, causing international oil prices to dive further.

A sustained oil price war is not in the interests of the parties concerned. Low oil prices can reduce production costs and promote economic development, but the accompanying drastic fluctuations do not meet the objective requirements of global economic development. Besides, oil market risks can spread to the financial market, producing a greater negative impact on the global real economy.