The impact is huge. Millions and millions of people lost their businesses. The psychological and economic impact of lockdown across the world is incalculable. The impact on future generations, on the students, and youth is something never witnessed before. The loss, besides other unlimited numbers of losses, of human lives is indescribable.
Another major impact was on the oil market. Let us break it down into its components
1. Oil prices before the coronavirus.
Total consumption was 100 million barrels per day where the USA was and remains as the first oil producer in the world. Saudi Arabia and Russia lost a big share of the market to the USA. The oil price was between$ 40-60 per barrel.
2- Oil Consumption after the corona Virus
Consumption dropped down to 70milliomn barrels per day. Thus, a 30million barrel drop down in daily consumption was recorded.
Cost of extracting oil in Saudi Arabia and Russia is around 2 dollars per barrel
In the West, the cost of extracting offshore and sedimentary rock oil is anywhere between $20-30 per barrel.
Because of the Coronavirus, oil storage became at full capacity because of the fall in demand due to the decline in economic activity.
In the West, the drop in prices of oil to extremely low levels made it uneconomic to produce offshore and the sedimentary oil. Some companies declared bankruptcy.
3.The forecast for oil
With no breakthrough in finding a vaccination for the coronavirus, oil prices are likely to remain low for a long period. Oil prices with the change of climate and where summer is coming are likely to pick up a little bit during summertime.
The US is looking for full energy independence.
The west is working hard on developing renewable energy resources which will be cheap to produce.
Europe is busy developing the gas fields in Egypt shores and in the gas fields near Cyprus to counterbalance the dependence on Russian gas.
Only when the USA, Russia, and Saudi Arabia with the decline of the coronavirus effect, reach an agreement on production levels, then the oil prices will return to the levels it had before the coronavirus epidemic.
We, In Gudra management consultancy, support all businesses, wherever you are in the world, and we stand beside you in good and in difficult times. We want to create a better world, a world free of Coronavirus.