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Conflict for oil between Saudi Arabia and Russia
Currently, the oil price of the OPEC quote at $ 22.83. Price has increased significantly from $ 17.63 to 22, $ 83. OPEC oil prices are part of a reference point for the price of oil, as well as West Texas oil and oil. According to the expansion newspaper, the price of oil fell 67.69% with reference to the established price twelve months ago. Oil by Brent and West Texas are the references of the price of oil sold in the world, as well as the one offered by OPEC (although to a lesser extent than Brent and West Texas).
A decrease in the price of oil means an impact on both crude and energy producing countries. This in turn, has an impact on the economy of a country. Which increases its impact today due to the Covid-19 pandemic. The trial is divided into three parts: the first explains the reasons for the decrease in the oil price of the OPEC;The second describes how the oil war between Saudi and Russia Arabia has impacted in Mexico;And the last part interprets through realistic theory how Mexico reacted to this problem.
In addition to starting from the hypothesis that Mexico increased its taxes to increase its fiscal resource. The beginnings of the decrease in the price of oil. As of February of this year, oil began to fall from $ 55.49 to $ 22.83. This greatly due to the current Covid-19 pandemic, however, is not the only reason. Because a disagreement occurred when establishing a production cut between two of the largest hydrocarbon producers such as: Saudi Arabia and Russia. The objective of crude oil production cut was to increase oil prices.
Faced with the demand that was filed in front of the pandemic, which was rejected by Russia. Eszter Wirth mentions that Saudi Arabia increased its production of 9.7 million barrels per day to 12.3 million. The impact of this decision affects both nationally and global. Since exports from both countries are mostly focused on the export of crude oil, in addition to impacting their finances. For its part, for the United States this meant having to reduce its production to be able to balance the price of oil, as companies are currently indebted.
In turn, it allowed industrialized Asian countries such as China and Japan to continue their accelerated growth compared to some European countries. So, in this way it benefits the economies of Russia and Saudi Arabia. The OPEC was founded in 1960 by Saudi Arabia, Kuwait, Iran, Iraq and Venezuela. Since its training has had problems becoming a fundamental part of the establishment of oil prices. In the analysis of Francisco Márquez de la blondia, he explains that one of the main reasons is that he has not kept the main crude oil producers in his organization.
Well, despite having large producers such as Saudi Arabia or Venezuela, there are countries that produce the same or more crude oil than OPEC member countries. For example, Russia produced about 12% of the global oil in 2018. So having great allied oil producers allows OPEC. The impact of the OPEC on the international system is so much that agreeing a cut or increase in production can influence the low or price increase.
However, over the years, it has lost its impact on the world oil price. This does not mean that OPEC has no relevance, but is not the same as in 1973 during the Arab-Israeli war period. Similarly, its prestige forgive it over time for the alliance with members not belonging to the organization. An important fact to mention is that the cost of production in the Middle East is less than that used in America, in which fracking predominates, which is quite expensive. Although this process has allowed which price of oil is less than $ 50, but in turn it does not allow it to rise to more than $ 100.
Petroleum price repercussions in Mexico. Currently, Mexico is going through an economic recession, which is part of the classical economic cycle. First, to understand the nature of this it is necessary to understand the definition, the characteristics and elements that make up a classical economic cycle. A type of fluctuation that is found in the aggregate economic activity of nations that organize their work mainly in commercial companies: a cycle consists of expansions that occur approximately at the same time in many economic activities, followed by recessions.
Similar general contractions and revival that merges in the expansion phase of the next cycle;This sequence of changes is recurrent, but not newspaper;In duration, economic cycles vary more than a year to ten or twelve years;They are not divisible in shorter cycles of a similar nature with amplitudes approaching their own. This economic cycle has two phases and three turning points. These phases are the recession (where Mexico is currently) and the expansion. The three turning points are the initial valley, the peak of cycle A and the final valley. In Mexico, the National Institute of Statistics and Geography (INEGI) calculates two coincident indices.
And advanced that describe and anticipate the turns in economic cycles. Erquizio, e., Garcia, J., Ramírez, r. He mentions in his thesis that to make these indices, various components are taken to measure economic activity: production, sales, employment, foreign trade and prices. Table 1 shows more detail the elements taken into account. Although it can be measured by GDP as an added value, however, taking into account more variable allows you to have a better simultaneity. As well as the possibility of better analyzing and comparing two points in time to evaluate a recession.
See Table 1 found in the annexes section. Band, h., Gómez, d., and Almaraz, I. In their article they analyze that one of the effects of the war of the price of oil is the direct impact on the federal reserves of Mexico. Well, these depend on international oil prices. Despite being evaluated in dollars, because it is the most useful international currency in the market, having low oil prices automatically decreases the value of federal reserves. Making the decision to maintain or increase the oil production number is a lousy response to the international panorama.
Because according to supply and demand, having an excess of production makes the price decrease, as well as the value of federal reserves. The other great factor is the current Covid-19 pandemic. Due to quarantine, several companies have canceled their services, others have stopped their production, and at best, they simply reduced their income. On the workers’ side, many have been forced to work since case, some dismissed and others unfortunately continue to work. Well, a large part of the work in Mexico cannot be transferred to Home Office.
What has decreased, not as expected, traffic and use of the car and public transportation. Therefore, the income obtained in the oil market has also decreased, which is interpreted in lower income in the fiscal resource. According to the definition of the Supreme Court of Justice of the Nation (written by Fernando Lanz Cárdenas), fiscal income is the contribution of natural and moral persons for public purposes;They are determined in the income law and are classified as: taxes, products, rights and uses. This phrase means the income obtained by the status of individuals in money, in kind or credit.
To finance the expenditures related to administrative or social economic demands, which make up public spending.Despite having various savings funds, the fiscal resource is the main source of income to solve public works or to be invested in support programs, etc. So it is always advisable to have a good amount in case a situation or panorama is presented in which the use of it is required. And it is currently an example of a panorama in which it can be used, of course, in addition to being invested from the president’s nation projects in turn or the promises of company.