One of the most important and significant commodities in the history of the modern world has been oil. Crude oil was so essential at one point that it was the basis of one of the largest monopolies in history: the Standard Oil Company. After the Second Industrial Revolution, which led to the popularization and availability of machinery and electricity in general, oil became an almost priceless product that seemed to keep the world spinning. Despite its importance decreasing since then, oil still remains an incredibly valuable resource. Nonetheless, the outbreak of COVID-19 and subsequent lockdown policies gave the oil industry an incredible blow.
The pandemic and crude oil
The pandemic took its toll on many industries, but oil was among those that suffered the most. In the United States, oil mainly hovered around the price of $60 and $70 per barrel in the first quarter of 2020 and seemed to be steadily increasing. However, in March, when the stricter pandemic guidelines were first put in place in the United States, the prices of oil began to fall dramatically. In fact, the prices fell so suddenly that towards the end of April, oil prices were actually negative. While there were many factors that contributed to this drop, the largest and most obvious was the lack of demand. Although there may be a limited amount of oil in the world, there is still an incredible amount of it being produced on a daily basis. During the pandemic, the production of crude oil (i.e. the supply) did not decrease by much, but the demand fell remarkably. Fear of being infected with the virus discouraged many people from leaving their homes unless they absolutely needed to. This meant that vehicles, most of which rely heavily on oil, were being used significantly less. In turn, this relative abandonment of vehicles led to the price of crude oil falling dramatically, not just in the United States but on a global scale as well.
Outlook towards the future
There is now a hope that the pandemic will be over soon. Many restrictions have been lifted in countries around the world, and the price of oil has changed as a direct result of this. As restrictions were slowly lifted throughout the second half of 2020 and the first half of 2021, the prices of oil have made an incredible recovery. So far, this recovery shows no immediate signs of ending any time soon. While an increase in the production of electric cars will certainly hurt the oil industry in the future, increases in oil prices seem to be unstoppable as oil prices now approach $75 per barrel in the United States. This is significantly higher than the price of oil just before the pandemic hit. Many analysts expect prices to reach $80 per barrel before the Summer ends, and some even believe that prices will reach $100 per barrel within the next two years. This just goes to show that volatility in the economy often follows volatility in the rest of the world. In this individual case, in response to a global pandemic, oil prices dropped to improbable lows and then increased to unbelievable highs all within the span of a single year.