In a shock to the petroleum markets, oil has now dropped to below $5 per barrel as Bloomberg reports.
Oil plunged below $5 a barrel as the coronavirus pandemic ravages global economies, threatening to erase an entire decade of demand growth, slashing thousands of jobs and wiping out hundreds of billions of dollars from company valuations.
Industrial and economic activity is grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. Oil has faced its own knock-on effects with a market massively oversupplied and nowhere to put physical barrels of crude. An unprecedented output deal by OPEC and allied members a week ago to curb supply is proving too little too late in the face a one-third collapse in global demand.
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“There is little to prevent the physical market from the further acute downside path over the near term,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.” (source)
For the common man, this means low oil and gas prices, something that his helpful to everyone’s wallets. However, it is highly destructive. People talk in terms of an economic and social war being waged by China with the spread of COVID-19. However, this act is one of war by the US against Russia.
Russia is a nation without an economy, as their economic base is selling raw materials, mostly oil, to foreign countries, and second is making cheap weapons for third-world dictators. Russia needs high oil prices to survive, and the US has been working to suppress them for a long time, even with this virus. The economic halt caused by the virus has just added to the situation, driving them below market value to such a point that it costs Russia more to pump and transport oil than it does to sell it, therefore making it not worth the effort to extract.
Russia is in very bad economic shape right now. She is collapsing from within, and it is possible that in the next decade or two, she could break up into a series of warring states, the reasons of which you can read in detail in the Shoebat archives.
This virus is, from the perspective of a policy maker, a ‘gift that keeps on giving’ because it is being used to realize many things very fast, one of which is the speeding up of the US war with Russia to it natural end.