Oil Price War began on 8 March 2020 with Saudi Arabia’s increase of oil production and proposals of up to 8 USD discounts per barrel. The action was taken because of disagreements between OECD countries and Russia on cutting oil production during the 2019–20 coronavirus pandemic. Oil prices had already fallen 30% since the start of the year due to a drop in demand. Saudi Arabia’s initiative caused a huge decline in already low oil prices, with US oil prices falling by 34%, crude oil falling by 26%, and brent oil falling by 24%. Following day, with the combination of price war and fears over the coronavirus outbreak, stock markets worldwide reported major losses. US shale companies, Russia, Saudi Arabia, have experienced severe impacts due to this conflict. Still, petro-states such as Iraq, Iran, Algeria, and Nigeria are the ones that are hurt by it. Especially for Iran, domestic turmoil seems imminent.
When the Oil Price War occurred, Iran was already dealing with several problems. Having over 12.000 cases of Coronavirus (COVID-19) and 1000 deaths, the entrance of over 400 billion locusts to Iran soil and massive trade sanctions were not enough for Iran so that an oil price war emerged recently. As a petro-state, Iran completely relies on its oil exports to uphold its economy. Break of the informal alliance between Saudi Arabia and Russia promise that the new prices of oil may be the normal prices in the long term. Hence, these new prices are not the ones Iran can survive on. By many experts, it is stated that the fall in oil prices is more critical for the country than Western sanctions, which are continuing for several years now.
On the other hand, there are some views opposing that Iran will fall into the unknown. According to these views, Iran is already an outlaw to some extent due to being labeled as a terrorist country by the US and dealing with large sanctions. Thus, if Iran can continue to produce as much oil and gas as it can for whatever it can get, generally to Asia and Eastern Europe, in whatever ways that it can, one might observe an increase in the oil and gas revenues. They were already shipping products to the East and Africa on vessels that then ‘disappear’ from tracking, so this approach is not new. However, increasing its share in the energy market would decently boost Iran’s economy in the long term.
As a result, it seems that stability for the country is up to Iran’s decision-making on important subjects. The government acted carelessly with Coronavirus outbreak, and now they are enduring the consequences. They feared backlash from the public in the domestic elections, and the story did not end well. Nevertheless, no matter how Iran is sitting on a powder keg or not with the price war situation, it all depends on how the country is taking action towards it.