Oil Prices take a dive amid global pandemic

Brian Figueroa, Reporter

The economy is very crazy right now and everything is closed in this pandemic but what nobody is talking about is how oil has gone down dramastically. Oil dropped 24% to a more than 18 year low on Wednesday as the coronavirus pandemic continues to sap demand for crude and as rising worries about a global recession lead to fears of longer term demand destruction. On Saturday Saudi Arabia announced massive discounts to its official selling prices for April and the nation is reportedly preparing to increase its production above the 10 million barrel per day .The kingdom currently pumps 9.7 million barrels per day but has the capacity to ramp up to 12.5 million barrels per day .China’s economic slowdown has curbed appetite for commodities in general while Saudi Arabia which produces a third of the Opec cartel’s output is keener on preserving its market share than it is on cutting production to boost prices. At the same time the rise of the US as a shale oil producer means it now imports less oil adding to the glut on world markets.

This makes life harder for other non US non Opec producers who are facing cutbacks particularly in the North Sea. How does this affect me? It means lower petrol prices although what you pay at the pump may not fully reflect the oil price drop. Bear in mind that excise duty and VAT make up nearly 60% of the price of a litre and that isn’t coming down any time soon.

Obviously if people are spending less at the forecourt they have more money to allocate elsewhere and that is a potential boost to the economy.

However if petrol-driven cars cost less to run that means there’s less incentive to invest in alternatives such as electric vehicles so in the long run low petrol prices could be bad for the environment. So this has really affected all different places and now we are running out of space to put all these barrels of oil.