As of Monday, the crude oil prices across the world plunged drastically. Severe lockdown across the globe has affected all corners of the business, including crude oil. For the first time in world history, the price of crude oil fell below $0 in negative.
This steep plunge from $22 a barrel to $-11.42 in a matter of weeks, what exactly happened? Let us shed light on why crude oil, one of the world’s most expensive commodities, is being sold for free.
Due to the COVID-19 coronavirus influx, travel and industries across the world have stopped. Severe lockdown and isolation see all forms of life stop. Wherever oil was being used, from traveling to production, all requirements have now ceded.
This global energy glut has forced producers of oil to consider their sale. Since nobody is utilizing their stored oil, there is no demand in the market. This has forced producers such as the United States of America to consider capacity. With little or no place to store all this produced oil, the global price has plummeted to below $0.
The price of a barrel of crude oil is based on many factors such as demand, supply, and quality. The supply of fuel has been much more than the demand since the coronavirus forced billions of people to stop traveling. Previously, global oil prices soared late in 2019 when Saudi Arabia’s biggest oil plant was attacked.
What does this mean for Pakistan?
Since Pakistan is a member of the OPEC (Oil Petroleum Exporting Countries), it is OPEC that is Pakistan’s go-to crude oil purchase store. The crude oil influx might have not reached OPEC nations as of now, but it is expected that after May, OPEC will feel the burden as well.
Also, another factor is that Pakistan deals with Brent Crude Oil and not WTI Crude Oil. Currently, even though prices have decreased, Brent Crude Oil is being traded at $26 per barrel.
However, even with the lack of concern, analysts think that the price of fuel in Pakistan will decrease substantially. Some claim that in the coming 2-3 weeks, the price of petrol in Pakistan might go as low as Rs. 70/liter.
On the other hand, others want Pakistan to make the most of this situation by purchasing WTI Crude Oil in bulk from the US. The possibility of that remains unknown as Pakistan is bound to purchase from OPEC only. With the USA’s buyers out of storage space, developing nations now do have a chance to shift the economic paradigms in their favor, if handled diligently.
Contrarily, Pakistan and other developing nations are facing acute economic shortages in these tough pandemic times. The investment for such a high-profiled purchase might not be an easy task.