Another one of Clark Weeks’ interests is small oil wells. They have traditionally been great investments. The pandemic is having an impact with oil production as with so many other things.
The COVID-19 crisis has given rise to many ‘firsts’. Adding to this list is the fall in oil prices with the commodity reaching below negative for the first time in human history. However, the pandemic is not solely responsible for this drop. Russia and Saudi Arabia are the world’s leading oil exporters. The ongoing price war triggered by these 2 nations is another major contributing factor towards this sudden drop in global oil prices.
Effects of Oil Price Crash on Countries
Most Middle Eastern economies like UAE, Kuwait, Saudi Arabia, as well as Venezuela, depend almost solely on the revenue generated from exporting oil. Therefore, any massive fluctuation in the oil price has an equivalent impact on these countries. Africa, too, has not been left unaffected by the global oil price crisis. As the continent with one of the youngest populations, countries like Nigeria have been on the fast-track for growth in recent years. However, the plummeting oil prices have put a dent on the nation’s growth.
In many countries around the world oil production is run by the government or by companies with close ties to the government. In the US, this is not the case. There are many large companies involved in production here as well as worldwide. However, the US has many small independent oil producers as well which Clark Weeks, an industry expert, is concerned about.
Effects of Oil Price Crash on Global Markets
Apart from threatening the economic stability of oil-exporting nations, the uncertainties in the oil industry may also render a large chunk of its global workforce jobless. The USA employs nearly 10 million people in the oil and gas sector and Saudi Arabia attributes 50% of its GDP to oil export. Likewise, the oil and gas sector make up 30% of the Russian GDP and employs over a million people.
All of these circumstances have raised a cause for alarm regarding the very stability of the global oil sector. Where in the past, the oil industry has been instrumental in driving economic growth for nations all over the world, today the industry is facing stagnated demand that is fast becoming a major problem.
Clark Weeks Concerned If Oil Prices Continue to Fall
While most Middle Eastern oil-producing nations are left with curtailed spending on government and social programs, some countries like Iran and Iraq are on the brink of social unrest if prices continue to fall. Nigeria derives nearly 9% of its GDP from oil export. It is also the most populous country in the African continent and one that is likely to be most severely affected by the falling oil prices.
Even if the situation begins to improve in the coming few weeks or months, it will be some time before these nations show any signs of recovery. Mostly because the global economy has to recover on the whole for the demand for oil to go back to what we have seen in the recent few years.
Countries are being impacted differently based on their cost of production. Some countries can still produce and make a profit despite the recent drop in prices. Many others lose money because the cost of production is over the current price of oil.
India, China, the USA, as well as most European nations are the largest consumers of oil. As demand has almost come to a standstill here, they are refusing to buy more oil. According to experts, the situation will not change even in the second half of this year. However, the operational cost of producing oil is still very much real and this has put an additional burden on oil-producing nations of the world. In such a situation a midstream logistics and gathering oil company like the Texas-based Enterprise Product Partners have stepped in to take over the excess shipment. But this is a short-term respite and not a permanent solution. Clark Weeks and others are concerned that small oil wells will be disproportionately affected by the drop in demand.