Financial markets of all shapes and sizes seem to be impacted by the current global crisis that has been engulfing the globe. The fossil fuel industry has itself been presented with multiple unique challenges outside of the current crisis.
Oil Markets in Trouble
The way the oil industry has been working as of late has left it with a weak-looking foundation. The oil industry has been hit with back to back events that have led to disastrous effects. There are many oil companies that will in the near future be in need of bailouts. The path that was blazed in order to get us here involves a few different incidents.
Oil War Involving Saudi Arabia and Russia
Two of the world’s greatest oil-producing nations are Saudi Arabia and Russia. These two nations in either an attempt to harm each other or in a coordinated move to harm US oil markets have been driving oil prices down by overproducing and generating a supply glut. The low prices have seriously impaired American oil companies’ profits.
The Chance of Chinese Economic Crash
The latest economic reports put out by the Chinese government show that the country is experiencing a contraction of its economy for the first time in over 50 years. This has stirred up a lot of anxiety amongst commodities investors. This has further worsened the selling environment and drove prices down even further.
Historically Low Oil Prices
With oil prices that have slipped below $20 a barrel technically it is less expensive to buy a barrel of oil than a bucket of KFC fried chicken. It may seem interesting to the average individual to see the cost of filling their cars up drop by half. This may not be as good of news as you thought.
Likely Ramifications of Current Economic State
The level that oil prices are right now is so low that American companies cannot even continue to operate and make a profit. If oil prices do not rebound soon this could mean that many oil companies will go out of business. This could add to the already extreme unemployment crisis that America is experiencing.
More information is available at The Wall Street Journal.