215
experienced a new fluctuation, the amplitude of which is becoming more pronounced day by day (www.bbc.com 2020a, b). The outbreak of the Coronavirus
and a sharp decline in economic activity are the main reasons for this renewal. The
downside is historical. The decline will reach 15.22 million barrels per day, the
lowest level of US oil (www.iea.org 2020).
Oil Price Decline, Coronavirus, and the Future of US Energy
Exports
The oil price decline, as was seen during the propagation of Covid-19 will be a
short-term issue. However, a certain date cannot be set for the recovery of the economic activities to witness higher oil prices again. Indeed, some longer term impacts
of the Coronavirus can be observed on energy markets as the crash in oil prices
leading to shutting down of wells will impact the characteristics of some producing
reservoirs. Nevertheless, with lower oil prices, more pressure is felt by oil production companies; eventually, oil suppliers with higher costs are pushed out from the
market. After any disruption in supply, demand, and price, the nature of the oil
market is to rebalance itself and find a new point of equilibrium. It must consider
that shale companies can be bankrupted, and some smaller companies with higher
production costs and with limited assets to hedge the risks of a lower price will be
pushed out of the market. Yet, it is not the end of shale oil and gas as the shale rocks
are still there and they are in high demand by the oil market. The fact is that the oil
business cannot dismiss shale oil even with the manipulation of the market by an
oversupply of crude oil (Author’s interview with Mo Dialami).
With the recent impacts of the Covid-19, the US must revise its energy strategy,
transforming its “energy dominance” policy into a more interactive energy policy as
an energy or market moderator. The US has also understood that it cannot ignore the
current market participants as these players have been in the market for long periods
of time. They can also manipulate the energy prices and make US oil less attractive
from the economic perspective. The US energy export will face some challenges if
its price cannot compete with other equivalent products in the market; yet, the US
will stay in the market and play a critical role as a market moderator.
The extreme drop in demand for oil due to major economies around the world being in
quarantine underlie the huge drop in oil prices. How long the oversupply will remain really
depends on how fast quarantine ends and economies get back to work and on the time it
takes to work off the large unemployment that the shutdowns are causing globally.
Low oil prices will not be favorable to US oil investment nor oil exports. Neither will
low global natural gas prices. Of course, low oil prices is not favorable to global investment
either. (Author’s interview with Dr. Michael D. Maher)
Russia, along with Saudi Arabia, has been playing a key role in oil market policy
since 2016, and currently the two countries are at odds over how to respond to the
global economic crisis caused by the Corona outbreak. This prompted Mohammad
bin Salman and Putin to meet in September 2020 on the sidelines of the G20 summit
Covid-19 and Changes in the Dynamics of the Energy Market
experienced a new fluctuation, the amplitude of which is becoming more pronounced day by day (www.bbc.com 2020a, b). The outbreak of the Coronavirus
and a sharp decline in economic activity are the main reasons for this renewal. The
downside is historical. The decline will reach 15.22 million barrels per day, the
lowest level of US oil (www.iea.org 2020).
Oil Price Decline, Coronavirus, and the Future of US Energy
Exports
The oil price decline, as was seen during the propagation of Covid-19 will be a
short-term issue. However, a certain date cannot be set for the recovery of the economic activities to witness higher oil prices again. Indeed, some longer term impacts
of the Coronavirus can be observed on energy markets as the crash in oil prices
leading to shutting down of wells will impact the characteristics of some producing
reservoirs. Nevertheless, with lower oil prices, more pressure is felt by oil production companies; eventually, oil suppliers with higher costs are pushed out from the
market. After any disruption in supply, demand, and price, the nature of the oil
market is to rebalance itself and find a new point of equilibrium. It must consider
that shale companies can be bankrupted, and some smaller companies with higher
production costs and with limited assets to hedge the risks of a lower price will be
pushed out of the market. Yet, it is not the end of shale oil and gas as the shale rocks
are still there and they are in high demand by the oil market. The fact is that the oil
business cannot dismiss shale oil even with the manipulation of the market by an
oversupply of crude oil (Author’s interview with Mo Dialami).
With the recent impacts of the Covid-19, the US must revise its energy strategy,
transforming its “energy dominance” policy into a more interactive energy policy as
an energy or market moderator. The US has also understood that it cannot ignore the
current market participants as these players have been in the market for long periods
of time. They can also manipulate the energy prices and make US oil less attractive
from the economic perspective. The US energy export will face some challenges if
its price cannot compete with other equivalent products in the market; yet, the US
will stay in the market and play a critical role as a market moderator.
The extreme drop in demand for oil due to major economies around the world being in
quarantine underlie the huge drop in oil prices. How long the oversupply will remain really
depends on how fast quarantine ends and economies get back to work and on the time it
takes to work off the large unemployment that the shutdowns are causing globally.
Low oil prices will not be favorable to US oil investment nor oil exports. Neither will
low global natural gas prices. Of course, low oil prices is not favorable to global investment
either. (Author’s interview with Dr. Michael D. Maher)
Russia, along with Saudi Arabia, has been playing a key role in oil market policy
since 2016, and currently the two countries are at odds over how to respond to the
global economic crisis caused by the Corona outbreak. This prompted Mohammad
bin Salman and Putin to meet in September 2020 on the sidelines of the G20 summit
Covid-19 and Changes in the Dynamics of the Energy Market