Oil, once the most precious commodity on Earth, is now being dumped in the international market. International traders do not want to lay their finger on the commodity nowadays, even if it is sold for free.
Oil prices in the international market early this week crashed to below zero, an unimaginable scenario since 1973 when members of the Organization of Petroleum Exporting Countries declared an embargo that led to a 400-percent increase in the commodity's price.
Amid the COVID-19 pandemic and low demand, US crude oil for delivery in May plummeted to an unprecedented low of negative $40.32 per barrel. The negative prices meant international traders were forced to pay their buyers to have the crude taken off their hands. The depressed demand has resulted in a huge inventory, with stockpile facilities across the globe close to full.
The lockdown in many countries, including the Philippines, has virtually stopped air, water and land transportation. The strict quarantine measures also grounded airlines and led to the closure of many offices, factories, restaurants, hotels and other small companies.
With little economic activities, the demand for oil, which is mainly used to fuel factories and transportation, has significantly gone down. Oil importing nations found no need to bolster their petroleum stockpile.
The global economy is heading for a deep recession that could last for months. The pandemic has paralyzed the US, China, Japan, Great Britain and the other economic powerhouses in Europe.
Meanwhile, the depressed price of oil, which slightly recovered above zero, will present a big fiscal challenge to Arab nations and other producers. With much lower oil revenues, Arab producers, specifically Saudi Arabia, will further scale down their expenditures and trim their infrastructure budget.
The reduced spending means labor layoffs and less hiring of foreign workers. The overseas employment outlook, thus, is pessimistic for the Philippines, which has over one million workers deployed in Saudi Arabia alone.
The new coronavirus pandemic is wreaking havoc on all economies. Policymakers must find ways to identify alternative jobs lost in the virus conundrum.
