Price of Oil Plummets and Demand Falls

The oil industry that was troubled before the pandemic, had a major price shock when Russia and Saudi Arabia didn’t agree on necessary production cuts stemming from reduced COVID-19 demand of their biggest importer, China. Even with the OPEC oil accord reached April 12, oil prices fell to $22 per barrel the next day and to below 0 to -$37.63 on April 20, 2020, with storage capacity running low.

The US Energy Information Administration EIA Short Term Energy Outlook from Q1 2020, forecasts a 9 percent reduction in motor oil demand in 2020 and a 10 percent reduction in jet fuel. The International Energy Administration (IEA’s) first quarter report shows a 2.5 million barrel per day reduction in demand worldwide.

Gas price on April 19, 2020 in Madison, WI.
Photo courtesy of Sherrie Gruder, UW-Madison Extension