The fall in value of crude oil post the pandemic
The fall of crude oil value is so worse that the price of one barrel is not even equivalent to that of a standard pizza in New York. Many oil companies are struggling as the price of oil, which was $60 per barrel in January, sank to $12. It is not just the corona and the following lockdown that caused this struggle. The competition between oil-producing countries, mainly the conflict between Russia and Saudi Arabia has led to more oil reaching the market.
As flights and other vehicles stopped operations due to the pandemic, a huge amount of oil is being wasted. Who is responsible for this? Russia, Saudi Arabia, America or the coronavirus? In fact, this situation is also an outcome of Saudi Arabia’s competition with Russia, without evaluating the possible damage corona could bring. The Saudi government decided to increase the production to discipline Moscow as Russia refused to follow OPEC’s decision of reducing production to keep oil price afloat. By the time the mass-produced oil reached the market, corona strengthened its grip on the world, interrupting the equilibrium.
The only option left is to stop production in the oil fields. If oil companies stop drilling, it will affect production in the long run. The United States of America that produces Shell Oil will suffer most as shell oil production is more expensive than Traditional Oil Well. In oil production, the US has already reduced around 30 lakh barrel per day due to lack of storage facility. In fact, the decline of this traditional influence of oil will be beneficial to countries that are emerging markets. Because oil industry will take more time than the rest of the market to overcome the current crisis. If emerging economies succeed in exploiting this fall and develop alternative energy sources, that will be the next revolution in the post-corona world.
