#OilPrices

Wacha nichanue mbogi mbona bei imeshuka, tusikuwe mataani, .

There are three (and only three) reasons that oil prices drop: (1) demand decreases, (2) supply increases, or (3) the monopoly power of oil producers falls.

When economists say that demand decreases, they mean something very specific—that at any given price, the amount demanded decreases.

There are two main ways that can happen: a slowing of the world economy or an increase in the supply of a substitute.

If the world economy slows—and it certainly looks as if it has slowed, or will, due to the COVID-19 virus and people’s reaction to it—the demand for oil will fall.