Question

Questions (250 Word Answer) 1. How has the corona-virus pandemic affected the oil industry? 2. Do you think oil producing nations will continue to work together after the pandemic is over? Why or why not? Please use some research to answer these questions and cite your sources.

Answer 1

1. The need for oil has reduced drastically hence affecting the supplier of oil like Saudi whose main revenue was from the export of oil. Hence creating a surplus and the global oil demand is estimated to fall by around 10 % that is from 99.9million BPD to 90 million BPD. The major reduction in demand is due to a fall in airline turbines and vehicle fuel. The US oil market was flourishing but the pandemic induced supply and demand shock led to a collapse of the oil prices. The demand for oil reduced pushing down the price to $24 a barrel.

2. In March Saudi had proposed to OPEC that they should reduce the production by 1 million barrels but it was refuted by Russia hence inducing a price war. Due to the pandemic and price war, the barrel was $25 which is at least $15 below the breakeven price. Saudi had the vision to diversify by 2030 but that is on hold as they have other things to focus on like youth unemployment which is high as 30%. Russia too is struggling to maintain the standards of living. Both are having increased public spending but with the price of oil currently, they won't be able to sustain themself for long. Demand for oil is estimated to fall further hence until the demand for oil increases rapidly there is no place the oil can go. The fate of the oil-producing nations are in the hand of the 2 autocrats hence I think that the oil-producing nations would not return to normal or work together after the pandemic.