Introduction
The selected article revolves around the current events related to the oil market. The author emphasizes the fact that the recent fluctuations in the price of oil become a serious challenge to the global economy and the functioning of various states across the globe (Sharma, 2020). The primary cause for the appearance of the problems in the given sphere was the inability of Saudi Arabia, Russia, and other OPEC members to reach an agreement regarding the established price for oil and amounts of its production (Sharma, 2020). As a result, the crisis in relations and, as well, in the given sector can be observed.
Main body
The writer also states that a significant oil production cut was sealed on April 12 and indicated the end of the crisis and the establishment of specific partnership relations between the main produces of crude oil. The given deal also meant that WTI May futures decreased to 9.42% or $2.11 to $20/.30 per barrel (Sharma, 2020). It means the introduction of a certain level of stability into the crude oil market, which is critically important regarding the modern business environment complicated by COVID and the pandemics.
The author concludes that the given agreement is not an optimal solution as oil producers will still experience some hardships during summer. It is also associated with the shrink of the global economy this year, which can reach about 3%. (Sharma, 2020). There is also a prediction that the price for oil can constitute $40 per barrel in the near future, which will also introduce additional instability into the market and precondition the emergence of the need for specific regulatory measures or negotiations between major producers.
The given article can be analyzed by using the macroeconomic perspective to determine the possible effects of discussed issues. First of all, oil is one of the most important strategic resources of the modern world that impacts the functioning of economies at the macroeconomic level. Sectors of heavy industries that are traditionally associated with the highest revenues depend on the supplies of oil and products related to its production as the critical components demanded for the stable functioning (McConnell et al., 2017). In such a way, the fluctuations in the price for oil means the lack of stability and the need to consider relevant forecasts linked to the given aspect.
Second, for countries that depend on the export of oil, such as Russia, Saudi Arabia, the USA, and other OPEC states, the reduction in the price means the appearance of the budget shortfall caused by the too low cost of gas or oil. It creates a dangerous situation at the macroeconomic level as the inability of the state to generate income strikes all industries, businesses, and increases the price for goods (McConnell et al., 2017). For this reason, the article touches upon a serious problem that affects the world at the moment.
Conclusion
Finally, the paper also touches upon the negative impact of COVID combined with the oscillations in price. The given factors are critical for companies regarding the macroeconomic perspective as the price for oil is used as a basis for planning and forecasting. In such a way, the discussed deal means the emergence of certain stability in business; however, it is critical to consider the future problems that might emerge in the next several months because of the pandemics and new tensions in relations between oil producers.
References
McConnell, C., Brue, S., & Flynn, S. (2017). Macroeconomics (21st ed.). McGraw-Hill Education.
Sharma, G. (2020). Crude reality of dire demand sends oil 9% lower despite historic OPEC+ deal. Forbes. Web.