The supply of oil sets pricing, but there’s a lot under the surface ranging from cartels to special interests, politics, and demand. Suppliers are constantly juggling matching demand with holding onto market share, and that balance got tipped as COVID-19 lessened the need for oil from travelers, airlines, etc.
Enter: the power struggle between Saudi Arabia and Russia, two countries that are keeping production levels high despite less need internationally. The glut of inventory caused the price of oil to plummet to around $20 per barrel, a near 20-year low*. For reference, oil started the year at $60 per barrel.
America became the largest oil producer in the world as of 2018 and has a vested interest in normalizing the supply of oil. For example, Halliburton, one of the world’s largest providers of oilfield services, furloughed 3,500 employees last week in Houston in response to the low oil prices. The administration is considering intervening, which could revitalize the sector, but in the meantime, it’s important to study the impact of low oil prices on Houston’s housing market.