There is little doubt that the world has entered a global economic recession as a result of the COVID-19 pandemic. Every recession lowers energy use, and this one may be a whopper. The 2008 financial crisis, and the Great Recession that followed, had a pronounced negative impact on the oil and gas sector, sending the price of a barrel of crude oil from about $150 to $35 in only a few months.
So it was particularly foolish for the Saudis to have initiated another oil war with Russia and the United States a few weeks ago as the coronavirus pandemic was emerging. The United States won the last oil war, but everyone’s going to lose during this one.
According to IHS Markit, United States oil production will bear the largest impacts in 2020-2021, and could fall by several million barrels per day over the next year. They point to a possible buildup of the most extreme global oil supply surplus ever recorded, ranging from 800 million to 1.3 billion barrels in the first six months of 2020.
The airline industry is devastated so we can assume most of that consumption will stop during this crisis. Assuming long-haulers won’t stop shipments too much because they are essential, diesel may not drop too much. But gasoline will drop dramatically as we all hunker down, work from home, stop recreational travel, and shutter all restaurants, bars and sporting events.
The average commute in the United States is 45 minutes and about 80% of that uses gasoline. According to the U.S. Census Bureau, 85% of our 150 millionworkers (or 128 million people) drove to their workplace in an automobile.