Header Ads

Breaking News

Look How Low Oil Prices Have Fallen: 6 Impacted Industries


Oil prices have fallen markedly due to Coronavirus

Oil prices have fallen markedly due to Coronavirus


Getty

The price of WTI last fell below this level for a couple of weeks at the end of 2018 and start of 2019. Other than that moment, the price has not been this low since September of 2017. The concern is that the current low price is not a blip like last year but rather a sustained drop or maybe only the beginning of a situation that could get significantly worse. If the Coronavirus continues to interfere with the Chinese economy and international trade, oil prices are likely to fall further. After all, China is the world’s largest importer of oil by a wide margin, accepting 10.78 million barrels per day in December, 2019.

Here’s who really needs to keep an eye on these low oil prices.

  1. First is, of course, oil producers—from international oil companies like Exxon and Chevron to wildcatters in shale fields—need to beware.
  2. Next, we have the oil industry employees and supplemental industries like truck drivers, welders and restaurant workers near oil fields who could all be affected.
  3. Financiers and investors—hedge funds, private equity and retail investors alike—who fund oil operations are worried about failed projects if revenue drops. 
  4. Airlines need to watch oil volatility, because they have an opportunity to buy jet fuel at low prices if it drops, which allows them to hedge for when higher prices eventually return.
  5. Certain state governments, such as Alaska, Wyoming, Texas, New Mexico, Oklahoma, North Dakota and others that fund their budgets in part with taxes on oil production and sales have to beware, as they may be facing unexpected lean times.
  6. Last, businesses that contract for products to be trucked around the country should be looking for discounted pricing. 

Despite all the talk about electric vehicles and alternative energy, oil is still the vital liquid that keeps much of our economy moving. We are reminded of that at times like these, when the oil market is anticipating volatility and change.

“>

West Texas Intermediate oil is trading just below $50 midday Monday. This is a very low price for the US benchmark, otherwise known as WTI. The lesson: don’t underestimate the impact of the Coronavirus on the oil market and the greater American economy.

The price of WTI last fell below this level for a couple of weeks at the end of 2018 and start of 2019. Other than that moment, the price has not been this low since September of 2017. The concern is that the current low price is not a blip like last year but rather a sustained drop or maybe only the beginning of a situation that could get significantly worse. If the Coronavirus continues to interfere with the Chinese economy and international trade, oil prices are likely to fall further. After all, China is the world’s largest importer of oil by a wide margin, accepting 10.78 million barrels per day in December, 2019.

Here’s who really needs to keep an eye on these low oil prices.

  1. First is, of course, oil producers—from international oil companies like Exxon and Chevron to wildcatters in shale fields—need to beware.
  2. Next, we have the oil industry employees and supplemental industries like truck drivers, welders and restaurant workers near oil fields who could all be affected.
  3. Financiers and investors—hedge funds, private equity and retail investors alike—who fund oil operations are worried about failed projects if revenue drops. 
  4. Airlines need to watch oil volatility, because they have an opportunity to buy jet fuel at low prices if it drops, which allows them to hedge for when higher prices eventually return.
  5. Certain state governments, such as Alaska, Wyoming, Texas, New Mexico, Oklahoma, North Dakota and others that fund their budgets in part with taxes on oil production and sales have to beware, as they may be facing unexpected lean times.
  6. Last, businesses that contract for products to be trucked around the country should be looking for discounted pricing. 

Despite all the talk about electric vehicles and alternative energy, oil is still the vital liquid that keeps much of our economy moving. We are reminded of that at times like these, when the oil market is anticipating volatility and change.

Source link

No comments