What you can do, I can do better.

Last year oil prices began to drop as supply outstripped demand due to the production of shale oil in the US and economic slowdown in Europe and China. Previously the OPEC would reduce production to reduce excess supply and thus raise the price of oil but this time Gulf countries have said that they will continue to pump oil even if the price falls to $40 a barrel. Various explanations have been offered: Gulf countries want to cripple US shale oil industry, US and Saudi Arabia are conspiring to bring down the price of oil to punish Russia for annexing Crimea and supporting Bashar Al Assad of Syria, By reducing the oil price they want to cut the financing of ISIS, Sunni Saudi Arabia and Israel cannot allow Shia Iran to develop nuclear weapons. Iran has been playing games in negotiations on inspections of its nuclear enrichment program and falling oil prices will really hit its economy, which is already suffering from sanctions imposed by western countries. Saudi Arabia, on the other hand, has $750 billion in reserves and so can withstand low prices for much longer. However, the price of oil dropping to almost half its value will have intended consequences. The North Sea oil industry is suffering huge losses, leading to job cuts. The British economy is not doing as well as thought and disposable income of families remains suppressed. The pound has dropped from Rs 103 in February last year to Rs 96 today. The Chancellor of the UK is hoping that a debt-fuelled spending spree, encouraged by low interest rate, will help him balance his budget. The US is not immune either. The shale oil industry was growing on money borrowed at near 0% interest rate and $550 billion in loans could become stressed. The President of the European Central Bank, Mario Draghi thinks that Europe is in danger of deflation as inflation rate is expected to fall to 0.1%. This is seen as signal that the ECB is preparing a bond buying program, known as quantitative easing. The Federal Reserve in the US used 3 doses of QE to weaken the dollar and got the economy growing again. Since the Fed stopped its bond buying program couple of months back the dollar has been getting stronger against all currencies. Japan has resorted to bond buying which has weakened the yen against the dollar and helped exports. Whether this will cure deflation or result in hyperinflation remains to be seen. Now it seems that Russia and Iraq are also increasing supply of oil. Is this a riposte to the Sunni gulf states by Russia and Shia Iraq. Why? Do they think they will have greater lasting power than the Gulf countries?  It is lucky for us as it will drastically reduce our import bill. Hope the government uses this luck wisely.