Oil price continues to tumble: will petrol get cheaper?
As Covid-19 cripples the economy, lower fuel prices and reduced inflation may provide some relief
The global oil industry is facing a perfect storm as demand plummets because of the coronavirus pandemic at the same time as a spat between Saudi Arabia and Russia causes supply to skyrocket.
The oversupply means countries are running out of storage space for their excess of black gold, in what consultancy IHS Markit calls “the most extreme global oil supply surplus ever recorded”.
The price now stands at around $27, having risen from just over $20 a barrel on 18 March - the lowest price in 18 years. Analysts have speculated that the crisis could see the price of oil drop below an unprecedented $10 a barrel.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Will UK consumers reap the benefit?
The drop in oil prices “will be felt most keenly by drivers”, says The Telegraph. “Bill payers will also benefit in coming months, with lower global energy prices and a cut to the Ofgem price cap from April expected to reduce gas and electricity costs.”
As the coronavirus lockdown massively reduces travel and economic activity, with people staying isolated at home, UK fuel faces a double impact similar to the global industry: a reduction in demand and abundance of supply. Earlier this week, Morrisons and Asda slashed up to 12p from the price of fuel.
It was, says The Sun, the UK's “largest ever single price cut”.
What’s more, as oil prices plummet, a number of industries will see their operating costs reduce. This, coupled with the reduced consumer demand, has resulted in a slowed rate of inflation.
Data from the Office for National Statistics recorded that consumer price inflation slowed to 1.7% in February from 1.8% the previous month, and this slowing rate should be of some help to consumers as the economy stutters as a result of Covid-19.
It was, said Howard Archer, chief economic adviser at EY Item Club, “a small step in the right direction for consumer purchasing power”.
He added: “Inflation looks certain to fall back markedly over the coming months which will provide some much-needed help for consumers and the economy.”
–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Get your first six issues free–––––––––––––––––––––––––––––––
Who loses?
“It is no exaggeration to say the oil industry faces its gravest crisis of the past 100 years,” says the Financial Times.
In the UK, the North Sea oil industry supports about 250,000 workers, and while the larger companies may be able to survive the plummeting prices, job cuts are likely to follow as costs are reduced.
The oil price war has already “wiped billions from the value of UK companies”, reports The Guardian, “and could threaten the long-term survival of weaker firms”.
Deirdre Michie, the chief executive of Oil and Gas UK, said the global price collapse has left the UK’s oil industry “in a paper-thin position”.
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
William Gritten is a London-born, New York-based strategist and writer focusing on politics and international affairs.
-
Antony Gormley's Time Horizon – a 'judgmental army' of 100 cast-iron men
The Week Recommends Sculptures are 'everymen questioning the privilege of their surroundings' at the Norfolk stately home
By Adrienne Wyper, The Week UK Published
-
'King's horses take free rein through London'
Today's Newspapers A roundup of the headlines from the US front pages
By The Week Staff Published
-
Is pop music now too reliant on gossip?
Talking Point Taylor Swift's new album has prompted a flurry of speculation over who she is referring to in her songs
By Richard Windsor, The Week UK Published
-
US-led price cap on Russian oil 'almost completely circumvented'
Speed Read 'Almost none' of seaborne crude oil from Moscow stayed below $60 per barrel limit imposed by G7 and EU last year
By Harriet Marsden, The Week UK Published
-
How might the Israel-Hamas war affect the global economy?
Today's Big Question Regional escalation could send oil prices and inflation sky-high, sparking a worldwide recession
By Elliott Goat, The Week UK Published
-
Recent mega-mergers could signal a turning point for the US oil industry
Talking Point Both Chevron and Exxon have recently spent billions to acquire smaller oil companies
By Justin Klawans, The Week US Published
-
Has Saudi Arabia lost control of oil prices?
Today's Big Question Kingdom goes it alone to cut production, risking tension with US and reigniting cooling inflation in Europe
By The Week Staff Published
-
Opec+: what oil production cut means for the West
feature Dramatic drop in output helps Russia but could spell further price rises for consumers
By Fred Kelly Published
-
US angered by Opec+ oil cut
Speed Read Energy prices to rise further as producers slash supply by two million barrels a day
By Fred Kelly Published
-
The countries that could follow Sri Lanka into economic chaos
Why Everyone’s Talking About Food and fuel shortages that rocked Asian nation are spreading around the globe
By The Week Staff Published
-
Record petrol prices in the US: who should carry the can?
In Depth Conservatives are blaming Biden for the high cost of petrol as if there’s some ‘dial in the Oval Office’ that he uses to set prices
By The Week Staff Published