214
the situation looks good. What is noteworthy here is how those predictors of the
downturn of the US shale industry are again calling Chapter 11 bankruptcy filings a
distress signal. The same attitude was taken in 2015–2016, yet US crude production
volume not only increased to precrisis levels but also surpassed them (www.oilandgas360.com 2020).
Whether the pattern will repeat remains to be seen but overestimating the value
of Chapter 11 numbers and ignoring the flexibility of shale players belies a profound
lack of understanding of US bankruptcy norms. The country’s existing framework
often allows companies at risk of bankruptcy to resurface in a new restructured form
in the very same space they previously occupied. Its name coming from the US
bankruptcy code 11, a Chapter 11 bankruptcy filing involves a company’s reorganizing its business affairs, debts, and assets. This measure is known as a reorganization bankruptcy, allowing time for the company to fix itself and prevent total
bankruptcy and foreclosure. Companies can use this measure to mind a starter under
which they may meet their debt obligations in a pay that pleases their creditors. If
such a plan cannot be established by the company, the creditors may propose a solution. “In most cases the firm will remain open and operating as a corporate entity.
The court where the Chapter 11 has been filed will help the business restructure its
debts and obligations” (www.oilandgas360.com 2020). The new act “imposes
shorter deadlines for completing the bankruptcy process, allows for greater flexibility in negotiating restructuring plans with creditors, and provides for a private
trustee who will work with the small business debtor and its creditors to facilitate
the development of a consensual plan of reorganization.” Ultimately, the best companies for the market will prevail regardless of the mounting number of Chapter 11
filings occurring in the first stages of the downturn. Cyclical downturns and market
corrections always see off weaker firms, and the same will be true for the years
2020–2021 (www.oilandgas360.com 2020).
Covid-19 and Changes in the Dynamics of the Energy Market
Like any other market, the oil market is ultimately affected by two factors: supply
and demand. In the last 3 months, two heavy shocks have been inflicted on the oil
market by both factors. First, the spread of the coronavirus, initially in China and
subsequently around the world, has led governments to curb the spread of the
virus. This has led to restrictions on public movement, and as a result, economic
activity in many parts of the world has experienced an unprecedented “sudden
halt” (www.investopedia.com 2020a, b). Lack of balance in supply and demand in
the global oil market along with the occurrence of geopolitical events and reduced
economic growth of major oil-consuming countries are effective factors in reducing oil prices. Oil prices rose slightly in September 2019 after drones attacked the
Aramco refinery. Earlier in the same year, insecurity and attacks on oil tankers in
the Strait of Hormuz were the main causes of oil price fluctuations. With the start
of the new year—2020—and the outbreak of the Coronavirus, the global oil market
6 Trump Energy Diplomacy
the situation looks good. What is noteworthy here is how those predictors of the
downturn of the US shale industry are again calling Chapter 11 bankruptcy filings a
distress signal. The same attitude was taken in 2015–2016, yet US crude production
volume not only increased to precrisis levels but also surpassed them (www.oilandgas360.com 2020).
Whether the pattern will repeat remains to be seen but overestimating the value
of Chapter 11 numbers and ignoring the flexibility of shale players belies a profound
lack of understanding of US bankruptcy norms. The country’s existing framework
often allows companies at risk of bankruptcy to resurface in a new restructured form
in the very same space they previously occupied. Its name coming from the US
bankruptcy code 11, a Chapter 11 bankruptcy filing involves a company’s reorganizing its business affairs, debts, and assets. This measure is known as a reorganization bankruptcy, allowing time for the company to fix itself and prevent total
bankruptcy and foreclosure. Companies can use this measure to mind a starter under
which they may meet their debt obligations in a pay that pleases their creditors. If
such a plan cannot be established by the company, the creditors may propose a solution. “In most cases the firm will remain open and operating as a corporate entity.
The court where the Chapter 11 has been filed will help the business restructure its
debts and obligations” (www.oilandgas360.com 2020). The new act “imposes
shorter deadlines for completing the bankruptcy process, allows for greater flexibility in negotiating restructuring plans with creditors, and provides for a private
trustee who will work with the small business debtor and its creditors to facilitate
the development of a consensual plan of reorganization.” Ultimately, the best companies for the market will prevail regardless of the mounting number of Chapter 11
filings occurring in the first stages of the downturn. Cyclical downturns and market
corrections always see off weaker firms, and the same will be true for the years
2020–2021 (www.oilandgas360.com 2020).
Covid-19 and Changes in the Dynamics of the Energy Market
Like any other market, the oil market is ultimately affected by two factors: supply
and demand. In the last 3 months, two heavy shocks have been inflicted on the oil
market by both factors. First, the spread of the coronavirus, initially in China and
subsequently around the world, has led governments to curb the spread of the
virus. This has led to restrictions on public movement, and as a result, economic
activity in many parts of the world has experienced an unprecedented “sudden
halt” (www.investopedia.com 2020a, b). Lack of balance in supply and demand in
the global oil market along with the occurrence of geopolitical events and reduced
economic growth of major oil-consuming countries are effective factors in reducing oil prices. Oil prices rose slightly in September 2019 after drones attacked the
Aramco refinery. Earlier in the same year, insecurity and attacks on oil tankers in
the Strait of Hormuz were the main causes of oil price fluctuations. With the start
of the new year—2020—and the outbreak of the Coronavirus, the global oil market
6 Trump Energy Diplomacy