Oil rigs in Cromarty Firth, Cromarty, Scotland
Kristian Buus/In Pictures via Getty Images Images
As Covid-19 cripples the economy, lower fuel prices and reduced inflation may provide some relief
Thursday, March 26, 2020 – 6:23am
The global oil industry is facing a perfect storm as demand plummets because of the coronavirus pandemic at the same time as a spat between Saudi Arabia and Russia causes supply to skyrocket.
The oversupply means countries are running out of storage space for their excess of black gold, in what consultancy IHS Markit calls “the most extreme global oil supply surplus ever recorded”.
The price now stands at around $27, having risen from just over $20 a barrel on 18 March – the lowest price in 18 years. Analysts have speculated that the crisis could see the price of oil drop below an unprecedented $10 a barrel.
Will UK consumers reap the benefit?
The drop in oil prices “will be felt most keenly by drivers”, says The Telegraph. “Bill payers will also benefit in coming months, with lower global energy prices and a cut to the Ofgem price cap from April expected to reduce gas and electricity costs.”
As the coronavirus lockdown massively reduces travel and economic activity, with people staying isolated at home, UK fuel faces a double impact similar to the global industry: a reduction in demand and abundance of supply. Earlier this week, Morrisons and Asda slashed up to 12p from the price of fuel.
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Source:: The Week – All news