Skip to main content

Coronavirus and its possible impact on the world economy on the examples of international oil production and oil prices


   
By: Nika Chitadze

President of the George C. Marshall Alumni Union, Georgia – International and Security Research Center

Director of the Center for International Studies

Professor of the International Black Sea University













In terms of social-economic aspects related to COVID 19, International Community is faced before the following sad reality. According to the International Monetary Fund, if humanity manages to defeat Coronavirus by the end of 2020, then the world economy will shrink by about 3%, which is a relatively optimistic scenario. By the other words, the world will suffer much worse if the international community fails to defeat Coronavirus by the end of this year.

It is noteworthy that during the economic crisis of 2008-2009, the world economy shrank by only 0.08%. 

As for the 3% decrease of the world economy during the year, it can be assumed that if according to today's data, the world's Gross Domestic Product (or the world economy as a whole) is about 86 trillion US dollars and within the recent years the world economy growth was 2.5-3% per year,  it can be pointed out that in 2020 the overall global losses will be about 5 trillion US Dollars. In this case, of course, the economic recession will be fixed almost in every state in the world.

At the same time, the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, which can be promoted by the governmental programs of the various countries in the world.

Taking into consideration the energy consequences of the World economic crisis - due to the rapid decrease on the demand for the fuel, especially oil products, from the global economic problems will especially suffer the oil producer states. For example, budget income of Saudi Arabia for 75% is depended from the oil export, with regard to Russia, the budget revenues of this country are depended from the oil export for about 37%. Despite the fact, that US is considered as one of the main oil producer and at the same time oil exporter country, also taking into account the fact that the falling the international prices on oil will be negatively reflected on the income of US Oil Companies – Trans National Corporations which are acting worldwide, Official Washington is also not interested in the radical decreasing the prices on the “black gold”.

Thus, taking into consideration the current realities, the extraordinary steps in the recent history of oil – related to the intervention in the policy of the states in the field of oil production have been implemented by US authorities. US President Donald Trump has not only persuaded Russia and Saudi Arabia to conduct the negotiations, but also promoted to reach an agreement in the field of oil production. On April 10, 2020 he actually saved negotiations process within the OPEC +, in participation of which was refusing Mexico, and with this country several other oil-producer states.
Mexico, which in September 2019 generated 4.5 million barrels per day, declared about its readiness to decrease its total production to only 0.1 million barrels, then as OPEC member states were requesting on the oil production reduction to 0.35-0.4 million barrels. Finally, Donald Trump promised, the disputed volume in 250 barrel will be US own responsibility and “Mexico will return money when this country will be ready to do it”.

The OPEC + and G20 countries have agreed to reduce oil production for the stabilization of oil prices in the context of coronavirus pandemics: At this stage it is discussed the reducing the world supply for 15%. From the moment of the declaration about results of negotiations, the prices of oil on the oil market have risen by 1.5 times and prevailed 30 USD per barrel.

Oil producer countries, which produce more than 70 million barrels of oil per day, or 70% of total world production, agreed on the reducing the production for 15 million barrels during the nearest two months (May-June). Participants of OPEC+ deal (OPEC members, Russia and several other oil-producers), which totally produce 43,8 million barrels, will decrease the production for 10 million barrels per day. The rest part of reduction will be provided by USA, Canada, Norway and other countries.

Despite of this agreement, taking into account the current realities, decreasing the number of tourists and international transportation, OPEC forecasts a drop in oil demand to 5-10 million barrels per day within 2020. From its turn, the above-mentioned agreement within the OPEC+ could not promote to stabilize the prices on the "Black Gold". Within the second half of the April, oil prices were between 10-20 US dollars. Particularly, as of April 27, the price was only 14,26 USD for barrel.  

According to World Bank report, monthly average price on oil decreased by more than 50 percent within January-March 2020 period. Based on the World Bank prognosis, within 2020 the average oil price will be about 35 USD. In general, it is expected for about 40% decline the prices on the different energy resources - including natural gas and coal.




Comments

  1. I'M NOW FULFILL FINANCIALLY BECAUSE OF THE LOAN I GOT FROM LFDS .I would like to bring this to the notice of the public about how i came in contact with Mr Benjamin after i lost my job and being denied loan by my bank and other financial institution due to my credit score. I could not pay my children's fees. I was behind on bills, about to be thrown out of the house due to my inability to pay my rent, It was during this period my kids were taken from me by foster care. Then i set out to seek for funds online where i lost $3,670 that i borrowed from friends which i was rip off by two online loan companies. Until i read about:loan online (247officedept@gmail.com) somewhere on the internet, Still wasn't convince because of what i have been through until a relative of mine who is a clergy also told me about the ongoing loan scheme  at a very low interest rate of 1.9%% and lovely repayment terms without penalty for default of payment. I have no choice than to also contact them which i did through text +1-989-394-3740 and Mr Benjamin responded back to me That day was the I'M best and greatest day of my life which can never be forgotten when i receive a credit alert of $400,000.00 Usd loan amount i applied for. I utilized the loan effectively to pay up my debts and to start up a business and today i and my kids are so happy and fulfill. You can as well contact them through email: (247officedept@gmail.com)  WhatsApptext  helpline: +1-989-394-3740 Why am i doing this? I am doing this to save as many that are in need of a loan not to be victim of scams on the internet. Thanks and God bless you all, I'm Oleksander Artem from Horizon Park BC , Ukrain.

    ReplyDelete

Post a Comment

Popular posts from this blog

Trends in global Foreign Direct Investments (FDI) reduction in 2020 and their impact on Georgia

Nika Chitadze Professor of the International Black Sea University President of the George C. Marshall Alumni Union, Georgia - International and Security Research Center Director of the Center for International Studies Invited Professor of the European University and Caucasus International University General Overview   The implementation of the Foreign Direct Investments (FDI) by the Transnational Companies in the different sectors of economy of the various countries in the World is one of the main examples of globalization. Noteworthy is the fact that in 2019, the volume of Foreign Direct Investment in various countries amounted to 1.54 Trillion Dollars. According to the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) in the world may decline by 40% in 2020 due to the Coronavirus pandemic and by 5-10% in 2021. Accordingly, it can be expected, that the volume of Foreign Direct Investment will fall to $ 1

რამდენიმე მოსაზრება აფხაზეთისა და ცხინვალის რეგიონის ისტორიაზე რუსეთის მიერ საქართველოს ორი ისტორიული ტერიტორიის შესახებ რეალური სიმართლის დამახინჯების მცდელობის საწინააღმდეგოდ ვლადიმერ პუტინის ინტერვიუს მაგალითზე

ნიკა ჩიტაძე შავი ზღვის საერთაშორისო უნივერსიტეტის პროფესორი ჯორჯ მარშალის სახელობის ცენტრის კურსდამთავრებულთა კავშირი, საქართველო - საერთაშორისო და უსაფრთხოების საკითხების კვლევის ცენტრის პრეზიდენტი  კავკასიის საერთაშორისო უნივერსიტეტის ასოცირებული პროფესორი ევროპის უნივერსიტეტის მოწვეული პროფესორი შავი ზღვის საერთაშორისო უნივერსიტეტთან არსებული საერთაშორისო კვლევების  ცენტრის დირექტორი ელ-ფოსტა: nchitadze@ibsu.edu.g e ტელ: (+995 577465300) აბსტრაქტი საქართველოს წინააღმდეგ რუსეთის მიერ წარმოებული პოლიტიკის ფარგლებში, რომლის ერთ-ერთ უმთავრეს შედეგს „ჩრდილოელი მეზობლის“ მიერ საქართველოს ორი ისტორიული რეგიონის აფხაზეთისა და ყოფილი სამხრეთ ოსეთის ავტონომიური ოლქის ოკუპაცია წარმოადგენს, შეშფოთების დამატებით საფუძველს ოფიციალური კრემლის მიერ ჩვენი ქვეყნის წინააღმდეგ დეზინფორმაციის გავრცელების პოლიტიკის წარმოება წარმოადგენს. აღნიშნულის ერთ-ერთი ნათელი მაგალითია ისტორიული ფაქტების დამახინჯება, როდესაც მოსკოვი მაქსიმალურად ცდილობს სა