A few days ago, I went to fill up my vehicle with fuel, and for the first time in my life, the total amount to fill the car up to the brim came to about RM90. Usually to fill up my 65-litre tank would cost me about RM120-RM140 depending on fuel price at the time.
The reason for this as you can see from the Carlist Fuel Price Update is that RON 95 only costs RM1.30 per litre at the moment. Compared to the same time last year where RON95 was RM2.08, you can now get a full tank of fuel for 35% less than what you usually would spend. The ultimate reason for all of this is of course the COVID-19 pandemic which has forced oil suppliers to lower their prices due to weak demand and oversupply.
This 18-year low in price is set to continue further, especially when at the moment, oil suppliers are arguing amongst themselves on how to stabilise the price. A meeting between OPEC+ (Organization of the Petroleum Exporting Countries) countries which was supposed to be held last Monday was delayed, and according to sources, the delays were caused by the ongoing blame game between Russia and Saudi Arabia for the plunging crude oil prices.
Even before the pandemic, oil prices were already starting to drop, and if we look at this chart from Market Insider, the drop looks like a mountain with a cliff edge at the end. Will we ever recover from this? Yes and no. When get through COVID-19 and regular life resumes, yes demand will rise, and if we follow the rules of supply and demand, everything is set to look golden once again for oil producers.
Saying that however, will everyday life continue just like how it used to be pre-COVID-19? Perhaps not immediately, as at the moment, economies are crumbling, nations are closing their borders, cities are in lockdown, travel has all but halted, people are losing their jobs or receiving pay cuts. How will this in turn affect the demand for crude oil? We'll have to wait and see to be sure. But what we can learn from history is that humanity will come out of this stronger and hopefully wiser. This is not our first major pandemic, and humanity has survived previous ones.
If we look at the Spanish flu pandemic which lasted for two years and wiped out a quarter of the world's population, the world did recover. Most have forgotten about it (did you know about the Spanish Flu?) Economy wise, the biggest ones to take a hit from that pandemic were the service and entertainment industry, but the rest did recover swiftly. I know we now live in a different world, but people do say, if you want to see what happens in the future, an excellent place to start is by looking at the past.