It may come to a surprise but the oil and gas industry has been battling recession since the onset of Global Financial Crisis more than a decade ago. Every year, the volume of production increased by more than global demand – meaning to say, the market has been experiencing a decline, with lower prices for natural gas and crude oil.
Throughout this period, the US gas and shale oil production dominated the increase in which it helped in transforming the US economy and eventually became the biggest global producer of energy sources. In the background though, traditional leaders in the market such as Russia and Saudi Arabia have been outgrown but they’re now planning to take the control of oil market from the United States back. And the outbreak creates the perfect opportunity in leveling the field.
It Shook the Industry for Sure
In these unprecedented times, it opens various power struggles worldwide. Right at this point in time, we’re in deep in recession and even at the edge of experiencing global depression.
The catalyst is when Covid-19 turned from a simple virus in a small province in China to a global pandemic affecting over 6 million people worldwide. We haven’t seen such collapse in oil demand for the longest time. What coronavirus has done is stopping a big part of the world from travelling from:
- Sea and;
This directly impacted oil demand and countries that are primarily in this sector.
It’s inevitable that both Russia and Saudi Arabia continues their battle of gaining control of global oil market back from US. The driving factor of Saudi Arabia and Russia is regaining market share in a stage where outlook is for weak demands. We are now in stage of market consolidation like what we’ve seen in luxury goods, consumer products, food as well as in automobile industry. Today, we are being surrounded by industries which are managed by few players and this will continue for years in oil.
Can the US Keep Momentum?
However, United States had the edge of being the global power with immense hard and soft power at their disposal. Thing is, US power peaked and now has fewer options in their arsenal. Obviously, they could impose oil import tariffs to protect domestic gas and oil industry but the question is, will it make a difference?
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