As the world looks to avoid a repeat of the Great Recession, many worry about the cost of keeping oil flowing.
While the industry has already been hit by a glut of oil, a slowdown in demand from China and other parts of the world could make things worse.
Here’s what you need to know.
There are signs the world is in a glut, and it’s getting worse: Some economists are calling the current oil glut a “glut,” but most experts are not.
Oil prices are now around $50 per barrel, down about 60 per cent since mid-2014.
The average price for a barrel of Brent crude is around $65 a barrel, according to Bloomberg data.
There’s a lot of pent-up demand for oil in Asia, and analysts are already predicting a global oil glut this year.
The question is, will the glut continue?
A glut of this magnitude is difficult to contain, especially given the fact that it has been happening for a while.
A glut is the opposite of a glut.
That’s what happened during the Great Depression, when prices fell in response to a global economic slowdown.
As we learned from the global economic downturn, a glut is what’s called when a country’s economy is so weak that its economic output can’t support prices, says Jeffrey Rector, chief market strategist at Bernstein Research.
The idea is that a nation’s economy needs to be able to absorb the added demand for its products that will result from a slowdown, says Rector.
As oil prices are low right now, it would be difficult for oil producers to meet that demand.
Oil producers also would need to be very selective about where they buy oil.
They would have to consider which countries and regions they are likely to need to export to.
Rector says it’s a “hard” problem, but one that has been on the rise for a long time.
“The question for oil and gas producers is, Is there any way to contain this glut?”
“In this case, it is unlikely that we will be able or comfortable to do so.”
The oil glut will make it harder for the U.S. and other major countries to balance their budget: The U.N. is calling for the global oil market to be more diversified and more efficient, to boost economic growth and reduce poverty.
And if the oil market is not diversified, the U,S., and other countries will be less able to meet their financial obligations, which would lead to a faster economic downturn and greater financial strain on governments, said the U.,S., China, Russia, and the European Union in a joint statement on Tuesday.
The economic crisis has also been blamed for increasing pressure on countries that are already struggling with unemployment, under-funded public services, and chronic budget deficits.
“It is very hard to balance a budget without the ability to sell some of your assets,” says Raul Rodriguez, chief economist at Goldman Sachs.
That means oil companies have to make sure they have enough cash to pay their bills and that they have adequate financing.
If companies are not able to sell their assets and meet their obligations, that could have a ripple effect that has a negative impact on the global economy, says Rodriguez.
“If we don’t have adequate cash flows, it will mean that the economies of the major economies are going to have to do a lot more with less,” he says.
It will put more pressure on global trade: The global trade deficit is expected to reach $5 trillion this year, and that’s up from about $4 trillion in 2015, according the International Monetary Fund.
That could put a dent in growth and job creation.
The U,W, and other world leaders have been pushing to improve trade deals and boost the value of their currencies, which have weakened due to a glut in global oil.
The WTO has proposed lowering the value to zero, and a new international body has been set up to negotiate trade agreements.
“While the global trade gap has been narrowing, the economic downturn has also slowed the process of improving trade balances,” said Rector in a note to clients.
“These trade balances will need to change if the global growth is to sustain.”
Countries will have to increase their spending: Countries are expected to spend more in 2018 and 2019, which will further strain their economies, says Jim Johnson, an economist at Moody’s Analytics.
“We’ve seen a sharp slowdown in the world economy, and some countries have been cutting spending and raising taxes,” Johnson says.
“They are now looking at spending and taxes to deal with the downturn, and we think it will become increasingly difficult for them to manage spending.”
He says that will make their economies more vulnerable to a slowdown.
“That will mean spending cuts will become more and more painful,” he said.
The world could be facing another global financial crisis: The International Monetary Funds forecasts that the world will have a $4.8 trillion financial