Today, we see the prices of crude oil all around the world plunging, where it came down to a 18 years- low. This situation is nothing short of a nightmare for gulf countries, who are mainly dependent on oil and gas revenues and at the same time facing a problem of dealing with pandemic Covid-19.
The main reasons for this episode of fall in global demand of crude oil is due to situation of uncertainty due to Pandemic. Recently in a report released by Goldman sachs, it reported a possible decline of oil demand by upto 28 million bpd (barrels per day). With almost 1/3 of the world population under lockdown conditions, the disruption in trade, prevailing isolationism and diversion of resources to deal with the pandemic, the global demand of oil has plummeted. It is very much evident that the pandemic which has claimed more than 96000 lives and affected nearly the whole world has made the countries around the world to break globalised order, taking a protectionist stance until they win the waged war against this virus.
The main reasons for this episode of fall in global demand of crude oil is due to situation of uncertainty due to Pandemic. Recently in a report released by Goldman sachs, it reported a possible decline of oil demand by upto 28 million bpd (barrels per day). With almost 1/3 of the world population under lockdown conditions, the disruption in trade, prevailing isolationism and diversion of resources to deal with the pandemic, the global demand of oil has plummeted. It is very much evident that the pandemic which has claimed more than 96000 lives and affected nearly the whole world has made the countries around the world to break globalised order, taking a protectionist stance until they win the waged war against this virus.
Also with fail talks between OPEC+ countries (Oil producing and exporting countries + RUSSIA and other non-OPEC nations) , there is an mismatch in supply-demand cycle, with more supply of oil than needed , global oil prices falls down.
USA , the highest producer of crude oil globally, is trying to mediate between the countries to cut their oil production capacities , so that prices may go up. According a report by OPEC and IEA (International energy agency) this episode will decline 50-85% of oil and gas revenues in 2020 for developing OPEC counties. Oil producing countries are finding it hard to generate adeqaute revenues for waging war against global pandemic which is posing a threat to their econmic prudence.
USA , the highest producer of crude oil globally, is trying to mediate between the countries to cut their oil production capacities , so that prices may go up. According a report by OPEC and IEA (International energy agency) this episode will decline 50-85% of oil and gas revenues in 2020 for developing OPEC counties. Oil producing countries are finding it hard to generate adeqaute revenues for waging war against global pandemic which is posing a threat to their econmic prudence.
India which is also battling against the virus, cheered with the falling global oil prices thinking it can cover its current account deficits, and which will provide a fiscal space for more resource mobilisation to fight against the pandemic. But is the situation really the way it seems, or are there some loopholes we cannot comprehend?
India and Gulf regions ties has two main segments:- 1) economic ties mainly consisting of imports from gulf countries, and
2) Remittances by Indian diaspors living and working in gulf region.
For the first, it is clear that with global trade disruption, the investments and trade is on halt which will cost India in the longer run.
For the second, with these situations, Indian diaspora is facing the brunt with stalled works and no income, giving more taxes to gulf countries , and living a life in filthy camps with high densities. This has made situation more complex where they are trying to come to their motherland , possibly carrying the virus with them, which will strain already crippling health-sector of India. This thing shows that, India may be getting benefit of low crude oil prices in the short run, but in the long-run it is losing.
This episode has shown the insecurity among the global oil players, with everyone having their own set of agendas, for S.Arabia it is to occupy more market share, for Russia it is to take advantage politcally to defeat USA, and for US it is to curb the situation due to political elections ahead in the row. And the fight like this will not go for long, because these type of situations pose fiscal threat to countries mainly dependent on oil and gas revenues. Now the second round of talks between OPEC+ countries has been concluded on thrusday, with an agreement of cutting 10 millions bpd of production. When the world is facing a threat of global recession, the fight like this aggravates the situation further of economic threats, and this time is for fighting against the physical threat of pandemic , not to fight against each other.
This episode has shown the insecurity among the global oil players, with everyone having their own set of agendas, for S.Arabia it is to occupy more market share, for Russia it is to take advantage politcally to defeat USA, and for US it is to curb the situation due to political elections ahead in the row. And the fight like this will not go for long, because these type of situations pose fiscal threat to countries mainly dependent on oil and gas revenues. Now the second round of talks between OPEC+ countries has been concluded on thrusday, with an agreement of cutting 10 millions bpd of production. When the world is facing a threat of global recession, the fight like this aggravates the situation further of economic threats, and this time is for fighting against the physical threat of pandemic , not to fight against each other.
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