29 Apr 2020 22:31 IST

Oil price shock: What it means for producers and consumers

Industry players worry that the pandemic will continue into summer, which usually sees peak demand

The dramatic fall in consumer demand for oil, in the context of the coronavirus pandemic has created an unforeseen and difficult scenario for the oil industry. The briefly negative prices of the US benchmark crude oil – West Texas Intermediate (WTI) – and crashing prices for Brent, the benchmark for crude from the North Sea, raised new questions beyond how long Covid-19 would suppress demand. Producers were worried about paying buyers to buy their oil, but now they face longer-term concerns, such as having to cut output; shut down producing wells and defer new well openings; put off exploration; and file for bankruptcies or get acquired in a wave of consolidation. Experts at UPenn’s Wharton School of Business look at all the angles here, in this article from Knowledge@Wharton.

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