Oil Collapse and COVID-19 Crisis: Demand Plummeting vis-a-vis Future of Oil Politics

World future holds much uncertainty due to rapidly expanding Coronavirus outbreak all over the world. Its drastic impacts will be out of control one’s would imagine today. The post Covid 19 Period will be remembered as tragic event of the twenty first century with numerous looming challenges.

Emergency in Health system, Economic recession, mass recovery in very Domain of life, anti globalisation sentiments, rise of nationalism mind set state control protectionist Policies, trade war technological advancements, emergence of Populist figures will have unprecedent impacts on future international miliue.

In contemporary International scenario Oil Politics taking immense popularity among nations, academia’s & intellectuals circle . Oil war between OPEC members countries & Russia further intensified Geo-Political, Geo-economic situation.

Oil plays vital role in international Politics, according to Lutz Kaleveman “oil is like Devil tear’s. Where there is oil there will be great game, Power Politics blood & Cries.

Tsarist Russia & Great Britain encircled Each other in central Asia. Both Powers sought out their strives to made their free & valid access to Central Asian untapped resources. Iran ,Caspaian Sea, Caucasian states & Today CARs Republics were the epic centre of Great game theory. Central Asia still hold magnificent importance due to its Geo strategic location oil & Pipeline Politics. Russia has been fueling Ethnic sectarian sentiments in new independent republics in Caucasian states to leash it’s Military presence & Check on other existing Powers. US bypass Russia Via westward Azerbaijan,Georgia & then Turkey. China initiating New pipeline to maintain incessant supply via Eastward route Iran ,Tajikistan Kazakhstan etc in case of maritime blocked from US & her allies in South China Sea & Indian ocean these land routes will provide safe supply to China .US justified its physical presence in Afghanistan through GWAT (global war Against terror) . Every regional non-Regional Powers meddling in Afghanistan quagmire due to oil & Pipeline Politics in the region .Iran Pakistan gas pipeline, Turkmenistan, Afghanistan, Pakistan, india gas pipeline, Iran China gas pipeline newly designed route under BRI projects are hinging in the unkind, war-Torn terrain of Afghanistan & CARs stats.

OPEC an organisation of Petroleum exporting countries consists of 14 members states spanning from different parts of the world. Middle East, African continent & Latin America. OPEC holds forty percent of oil resources in international market. It has been playing vital role in Oil Market as like Cartel. In 1973 surprise attack from Syria & Egypt on Israel first time exacerbated its Valid importance when US supplied $two billions worth military equipments to Israel . Gulf state’s imposed Oil embargo on US & Many of Israel supporter’s. US witnessed huge losses in their GDP. in the west long lines at the Pumps ,public anger & severe Economic downturn first time compelled West to its knees, front of the third world oil rich Gulf countries.

OPEC facing several challenges. Antagonism among members states, Iran, KSA rivalry , clashes with Non members oil producing countries particularly Russia, US shale gas revolution, crude oil production, Venezuela internal ruined situation, new technological advancements, less dependency on oil, inventions of renewable energies,Climate issues decrease in Corbon emissions & so on .

Iran Iraq war, Saddam Hussain & 2003 US invasion Curtailed Iraqi oil production from 11b/d to 4b/d. Economic sanctions & deteriorated situation massively hit Iraqi foreign investment which tools twelve years of pumping capacity of pre revolution period 1979. Soviet Union story is similar to Iraqi oil production during collapse of USSR & post cold war era.

From Gerald Ford to Donald Trump every US president consider OPEC as potential threat to US economy due to controlled price system & extensive monopoly on oil industry.

OPEC was created in 1960 ,before it oil market was dominated by the western led Multi national corporations (MNCs) . Dr Musaddaq nationalisation of Irani Oil products from Britain & OPEC members holds on oil production consequentially changed oil producing states policy in international oil market with increased state control Mechanism .

Gulf OPEC members states enjoyed better price rate due to Venezuela internal turmoil & civil war in Libya. Oil production get fragile from Venezuela & Libya which benefited others members states to pump more oil in Market.

Current scenario.

Oil war between Saudi Arabia & Russia finally settled with some gain bargain settlement. KSA which has less oil resources than Russia, Even Iraq ,Venezuela & America but its pumping capacity gave her upper hand in oil Market. Saudi extra oil pumping capacity giving Saudi staunch position in OPEC & Oil market. Decrease in production increase in price’s rate, increase in production & decrease in prices or decrease in production & Prices are the hanging issues between OPEC & Russia.

Covid 19 outbreak shockingly hit Oil industry in the world. Severe lockdown in China which is the largest oil importing consumer country in the world . Massive Disruption in supply & Demands Oil prices went to its historical downturn. US oil industry badly crashed with lowest oil prices in US history.
US shale revolution & discovery of Crude oil ,jet fuel & gasoline also intensified other oil producing countries queries. From 2016 US exporting the same level of oil which she imports before.

Mismanagement of oil supplies imposed by endogenous or exogenous forces has created unprecedented uncertainty globally. Covid-19 created some tricky miseries in oil field . Due to overwhelming lockdown in the world oil demand become lowest in the history.

Disruption in oil supply .

Lack of access to storage facilities due to Corona virus fear.

Lack of storage capabilities.

Accumulation of oil surplus.

Decreased in prices & bankruptcy in oil industry.

Major oil firms going to face huge economic losses.

Banks, investors pulling their money from oil industry due minimum cross benefit ratio.

The most notable factor is possible damage to oil production for long term. If the oil demands dose not pick-up sufficiently in the coming days it will dry some oil wells & old oil production facilities.
not all oil fields are geologically alike, and some are easier to close and restore later than others. In case of long term logistic problems, further decrease in oil demands may shut in most of the oil Wells in the world. Offshore & Sea based production facilities are more in a stake . Venezuela & Libya are in severe risk.

Oil turmoil will surely push KSA ,Russia, Qatar ,Kuwait, Algeria & other oil producing countries to severe economic stagnation. Oil & gas contribute 50% in KSA GDP & 70% in exports . Russian GDP 30% relying on oil & gas 60% in exports .KSA earning 20 to 40 $billions from Haj sector, if oil prices remain at 30 b/d it means KSA would generate 110 to 130 $billions annually. KSA budget is above than 290 to 310 $Billions it Means KSA will take enough loans internally & externally which ultimately lead KSA to huge budget deficit slow oil price will harm SBM economic vision of 2030 which need huge amount to materialise desired Goals.

For non-producing countries particularly Pakistan, India Bangladesh are in reciprocal conditions with zero some tragedy. These countries spending enough amount on oil imports. They will equally benefited from low oil prices but due to severe economic crises in Gulf oil rich stats they will deprived from profitable remittance coming from oil producing rich Gulf countries. It will create problems for millions of people living abroad.

The world is fighting with an unforgivable untenable enemy. Here we have to wait for more fury & fire situation in coming days. Covid-19 history will be written by the hands of victors.

Qaiser Mahmood undergraduate’ student of international relations, International Islamic University Islamabad. The views and opinions in this article belong to the author and do not necessarily reflect the editorial policy of Millat Times.

The Editor of Millat Times English and founding member of Millat Times Group, featuring stories and reports Email: irshadayub5@gmail.com