When it comes to industry there are already obvious survivors, as well as a whole host of losers, as a direct result of the pandemic. To take just two examples, the supermarkets fall into the first camp, with grocery sales in the UK hitting record levels in March. It is literally better than Christmas for the supermarkets right now, with £10.8 billion sales in the past four weeks alone, according to consumer analysts Kantar.
Then there are the airlines. With easyJet having grounded its entire fleet and now IAG-owned British Airways suspending all flights in and out of London Gatwick, the knock-on effect of a near-global restriction on all but absolutely essential travel is taking its toll on an already-beleaguered industry.
And then there is the oil industry. Less obvious at first glance than those companies and industries on the consumer frontline, but an even more telling indicator of the unprecedented time we’re living in.
As US crude oil prices fell below $20 a barrel on Monday, close to their lowest level in 18 years, the pandemic is changing the world in ways that we would never have anticipated. Brent crude, the international benchmark, fell close to 13% to a low of $21.76 a barrel, and that is the lowest it has been since 2002. The effect of the falls are a direct result of the pandemic.
A global lockdown, which has seen industry cease, travel stop and life generally grind to a halt has seen oil consumption across the world fall on an unprecedented scale.
Just three months ago, in the first week of the new year, the oil price passed the $70 a barrel mark amid tension over threats between Washington and Tehran, in the immediate aftermath of the United States’ unmanned air strike, which killed Qassem Suleimani, a leading military figure in Iran.
The world waited with bated breath to see whether there would be any retaliatory attacks on US oil company pipelines, or where Western and American oil companies have invested in new exploration, and another surge in the price of crude.
Back to today and such is the collapse in oil consumption across the world, as a direct result of the coronavirus pandemic that it is probably close to being equivalent, in terms of size, to OPEC’s entire output.
Demand is now down by as much as a quarter, or roughly 25 million barrels a day. That is close to what OPEC, the cartel of mostly middle eastern oil producers, churns out every day.
Yet at the same time, an ongoing price war between Saudi Arabia and Russia, has seen supply rapidly increase.
The Saudis launched the price war this month after clashing with Russia over how to respond to the coronavirus-linked hit to demand. While the US has put pressure on Saudi Arabia to scale back its supply surge, that has had little impact.
But with the global shutdown in homes and factories hitting demand so overtly, and an immediate question likely to have to be where to store all this surplus oil, surely a reckoning across the industry is on the cards.
With industry insiders saying anything under $35 a barrel is a loss-maker, something has to give. The pandemic isn’t showing any sign of going away any time soon, so some sort of rationalisation is going to have to take place. With, as always, the survivors emerging who seize opportunity - and those who can’t or don’t, left with no option but to scale back or simply pack up.
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