Big Oil is expected to bounce back in the next 18 months. With the current global crisis putting a glug in the pipeline, gas prices have been lower than $0 per barrel in some places.
Countries Dual For Oil
At the beginning of the year, both Saudi Arabia and Russia went into a production war. This meant each country would be able to remove the limitations on how much they could produce.
With the events unfolding, each country wanted to be the largest producer. Things were going well until a major stick with thrown into the spoke of consumers.
COVID-19 Crashed Industry
COVID-19 is currently sweeping across the globe. With each country enacting “stay-at-home” policies, this means limited driving (if any) and a travel band in and out of certain countries.
With so many people staying inside, gas purchases were down disparagingly. This did not stop either country from making a cut to their production. While many other oil companies around the world were scrambling to find extra storage for their fuel, Saudi Arabia and Russia kept production rolling.
The industry took such a huge hit that for a time, the price for one barrel of crude oil was less than $0.
With so little demand and such a high surplus, things were looking dire. The virus had inadvertently crushed many businesses and the closing of some major benchmark companies began to happen.
Fortunately, the future is in sight for the world. With many largely effected areas now flattening their curve, lesser restrictions have been made for traveling.
People are going back to work and thus need to refuel their vehicles. The process will take time, but it will evolve with the slowly lessening of current travel restrictions. Until then, oil will have to sit back and wait for the surplus to be sold off before they can adjust their prices.