Global oil prices have recorded a noticeable decline to levels that haven’t been seen since 2002. The fall is due to the collapse in demand as a result of the global pandemic and economic shutdown. At the same time, equity markets around the world have suffered historic losses amid intense selling linked to the coronavirus pandemic. Central banks in many countries decided to cut interest rates on the hope that this move will reduce the cost of borrowing, encouraging spending, and boosting the economy.
Naturally, investors fear that the global pandemic will destroy economic growth, despite government measures to halt the downturn.
The coronavirus, which has spread to more than a hundred countries, has created a state of fear of rapid spread, which led to the collapse of the global economy including oil markets. Also, ambiguity in the effect complicates future estimates and predictions on how and when the disaster will be over. Some analysts have warned that markets may fluctuate until the pandemic is contained because the economic and social implications are many and multiple.
I think the world will not be able to fully understand the impacts of this situation until long into the future. It is only natural for economists today to fear how long this virus will last, especially in the major industrialized countries.
A report published by the American Center for Strategic and International Studies in November 2019, emphasized a growing recognition of the need for a stronger and coherent approach to health security. It called on the US administration to adopt a preventive policy against epidemics, their protection, and resilience.
The oil sector is not the only field affected. Finance, aviation, retail, service and the food industry as well as many other sectors have had to cancel business, cut staff and wages, and move to emergency measures. Many countries of the world have taken strict measures, including strict ban and closure on countries and capitals, which led to a complete cessation of industrial production giants.
Some have however seen remarkable growth. Some stores and online delivery services recorded significant growth, with consumers staying home and storing goods, with continued warnings about the importance of household isolation and the growing epidemic.
Despite attempts to contain the spread of the virus so far, in addition to tightening quarantine measures, it is necessary to develop scenarios that anticipate the worst scenario with regard to the repercussions of the “corona crisis” on the global economy and the energy market in particular. And this should be especially focused on making sure people can eat, pay rent and survive - not just cutting salaries and laying off staff and leaving them to starve to death.
Some experts considered that the global economy may be subjected to violent shocks due to the effects of the coronavirus on the global economy due to increased travel restrictions, reduced oil demand, decreased production and sales of cars, and reduced spending on tourism. Most governments in the industrialized and Gulf countries also started pumping money. But, there is a limit to the amount of money that governments can allocate, especially whose income depends on exporting oil. Businesses also need to share the burden, to support their employees in hard times just as they benefit from employees in good times.