The COVID-19 or Coronavirus outrbreak has broken the Fossil-Fuel Industry or the Petroleum Industry. The futures of sales on oil is crashing, the value of oil is shrinking, as the demand has gone bust within a short time. While the OPEC-Plus countries and other oil producing continued to drill oil and produce more barrels of oil. Which by all means are surplus. This means, the cost of production and the possible hitting the market at a loss.
The oil industry is hit by the lack of ordinary transport. That people are not flying, they are not using public transport or their own cars. As so many nations and republics with lockdowns. So, the demand has fallen dramatically over the last few weeks. This means the amount of drilled oil and surplus will stored, as the wholesale struggle to be traded and the ones buying need to keep it in stock. Since, the market is saturated with surplus as it is.
Why did the Oil Prices Crash:
“First, demand has been obviously decreasing as the coronavirus spreads around the world. Many countries took preventative measures including social distancing, restrictions on going out and prohibitions on international travel. This has sharply reduced demand for oil for transportation via vehicles and airplanes” (…) “Secondly, there is a technical reason. In the futures market, investors have to end the contract by doing a reverse trade by a certain expiry date, or buyers have to take physical delivery of the oil. The contract of WTI crude for May delivery, which was most actively traded, expires on Tuesday, so many investors who had bought oil rushed to sell to close the trading” (Rurika Imahashi – ‘Four things to know about the historic oil price plunge’ 21.04.2020, Asia Nikkei – Asian Review).
We can easily see and understand why we are here. There is no tourism right now. Airlines are not operating. Companies are going bonkers and people are under lockdown all across the board. Not only in one Republic, but in most. There isn’t a Kingdom, Republic or a Nation in itself, which haven’t had a lockdown or movement restriction. There are so many places where the public have been restricted.
That this industry has been hit and hard. This is only natural by the actions made by all governments and citizens following the social distancing and less travel. That is why the petroleum industry have more production, than what its actually trading. The wholesale is failing, while there is surplus in stock.
The petroleum and gasoline will be hit for a while, until the public and transportation companies uses as much as it used too before the COVID-19. The usage of cars, public transport and aviation industry too.
We are seeing a crash of industry because of how we changed quickly and how the lockdowns interfered in the usual acts of man-kind. We don’t need as much petroleum and fossil-fuel to get around. We don’t even travel within out own towns. There is just needed workers who does. The rest are based in small spaces. There already other industries hit already like Airlines, Tourism and so-on. This is a continuation of it.
The oil crash will directly hurt markets. It will not a big whoesale, as there is a lack of storage and places to put the millions of surplus barrels of oil. That is before the ones produced in the future. Peace.