{"id":43821,"date":"2025-05-21T19:13:29","date_gmt":"2025-05-21T13:43:29","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=43821"},"modified":"2025-05-21T19:13:44","modified_gmt":"2025-05-21T13:43:44","slug":"the-new-oil-conflict","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/21-05-2025\/the-new-oil-conflict","title":{"rendered":"The New Oil Conflict"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/ Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A new oil war is unfolding through production and pricing strategies rather than armed conflict, with far-reaching global economic implications.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Background<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Recently <strong>OPEC+ <\/strong>decided to increase crude oil output by <strong>411,000 barrels per day<\/strong> (bpd) from June 2025.<\/li>\n\n\n\n<li>This marks the third consecutive month of production increase, reversing part of the <strong>2.2 million<\/strong> bpd voluntary cuts taken in 2023.<\/li>\n\n\n\n<li>This move caused Brent crude prices to drop sharply, indicating a highly sensitive oil market.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Steps taken by Saudi Arabia<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Saudi Arabia significantly reduced its crude output in 2024, bringing it <strong>below 9 million bpd<\/strong>, its lowest since 2011, in an attempt to support falling oil prices.<\/li>\n\n\n\n<li>Due to non-compliance from members like <strong>Iraq, Kazakhstan, UAE, and Nigeria<\/strong>, it now seeks to counter overproducers by flooding the market, a strategy used in past oil wars.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reason for policy reversal<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Post-COVID Demand Weakness:<\/strong> After COVID the recovery of the economy was <strong>\u201cK-shaped\u201d<\/strong> i.e. uneven and fragile and oil demand did not bounce back strongly.<\/li>\n\n\n\n<li><strong>Rise of Non-OPEC+ Producers: <\/strong>Countries like <strong>Brazil and Guyana<\/strong>, along with <strong>U.S. shale oil producers, <\/strong>aggressively expanded production to capture market share, adding to the global supply glut.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons for Decrease in Oil Prices<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Oversupplied Market:<\/strong> Even as demand stagnates, multiple producers are adding supply, creating downward pressure on prices.<\/li>\n\n\n\n<li><strong>Peak Oil Demand Theory: <\/strong>The International Energy Agency (IEA) projects that global oil demand may plateau or even decline by the end of the decade, weakening long-term price prospects.<\/li>\n\n\n\n<li><strong>Energy Transition:<\/strong> The global shift towards electric vehicles and renewable energy, especially in major markets like China and Europe, reduces reliance on fossil fuels.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Impact on India<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Short-term Gains: <\/strong>A <strong>$1 decrease<\/strong> in crude oil price translates into an annual saving of approximately <strong>$1.5 billion <\/strong>for India.\n<ul class=\"wp-block-list\">\n<li>Lower prices <strong>ease inflationary pressure and reduce the import bill,<\/strong> helping India\u2019s current account balance.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Long-term Risks: <\/strong>Prolonged low oil prices can <strong>harm the economies of Gulf countries, <\/strong>many of which are India\u2019s key trade and investment partners.\n<ul class=\"wp-block-list\">\n<li>Over nine million Indian expatriates reside in the Gulf, and any economic slowdown could lead to job losses and <strong>reduce the $50 billion in annual remittances<\/strong> India receives.<\/li>\n\n\n\n<li>India\u2019s own<strong> refined petroleum exports,<\/strong> among the top items in its export basket, may suffer due to falling global oil product prices.<\/li>\n\n\n\n<li><strong>Investment from oil-rich sovereign wealth funds<\/strong> might slow down, affecting India\u2019s infrastructure and energy projects.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#ebecf0\"><tbody><tr><td><strong>About OPEC<\/strong><br>&#8211; The <strong>Organization of the Petroleum Exporting Countries (OPEC)<\/strong> is an intergovernmental organisation established in 1960 at the <strong>Baghdad Conference<\/strong> by <strong>Saudi Arabia, Iran, Venezuela, Kuwait and Iraq<\/strong>.<br>&#8211; Currently, it has <strong>12 members<\/strong>, viz. Algeria, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela.<br>&#8211; <strong>Objective: <\/strong>To<strong> <\/strong>coordinate policies with respect to petroleum demand and supply to ensure fair and stable prices and ensure a steady income to oil producing countries.It is <strong>headquartered<\/strong> in <strong>Vienna, Austria.<\/strong><br><strong>OPEC+<\/strong><br>&#8211; <strong>OPEC+ has 22 members, <\/strong>made up of <strong>10 major oil producing countries<\/strong> (Russia, Kazakhstan, Azerbaijan, Brunei, Bahrain, Mexico, Oman, South Sudan, Sudan and Malaysia), <strong>along with the 12 OPEC members.<\/strong><br>&#8211; <strong>It was formed in 2016<\/strong> after the adoption of the <strong>\u2018Algiers Accord\u2019<\/strong> by OPEC countries in September 2016 and signing of the <strong>\u2018Vienna Agreement\u2019<\/strong> in November 2016 between OPEC and other major oil exporting countries.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/news\/international\/the-ongoing-oil-price-tensions\/article69593701.ece\" rel=\"nofollow noopener\" target=\"_blank\"><strong>TH<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>Context<\/strong><\/h3>\n<li class=\"ms-5\">A new oil war is unfolding through production and pricing strategies rather than armed conflict, with far-reaching global economic implications.<\/li>\n<p><\/p>\n<h3><strong>Background<\/strong><\/h3>\n<li class=\"ms-5\">Recently OPEC+ decided to increase crude oil output by 411,000 barrels per day (bpd) from June 2025.<\/li>\n<li class=\"ms-5\">This marks the third consecutive month of production increase, reversing part of the 2.2 million bpd voluntary cuts taken in 2023.<\/li>\n<li class=\"ms-5\">This move caused Brent crude prices to drop sharply, indicating a highly sensitive oil market.<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/21-05-2025\/the-new-oil-conflict\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-43821","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/43821","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=43821"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/43821\/revisions"}],"predecessor-version":[{"id":43831,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/43821\/revisions\/43831"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=43821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=43821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=43821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}