Adding Fuel to the Fire : Cheap Oil during the COVID-19 Pandemic
The outbreak of COVID-19 and the wide-ranging measures needed to slow its advance triggered an unprecedented collapse in oil demand, a surge in oil inventories, and a record one-month decline in oil prices in March 2020. This paper examines the lik...
| Main Authors: | , , , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/284371594670190475/Adding-Fuel-to-the-Fire-Cheap-Oil-during-the-COVID-19-Pandemic http://hdl.handle.net/10986/34129 |
| Summary: | The outbreak of COVID-19 and the
wide-ranging measures needed to slow its advance triggered
an unprecedented collapse in oil demand, a surge in oil
inventories, and a record one-month decline in oil prices in
March 2020. This paper examines the likely implications of
the 2020 oil price plunge for emerging market and developing
economies. It presents four main results. First, the record
plunge in oil prices was predominantly driven by demand
factors as wide-ranging measures to stem the pandemic
precipitated an unprecedented collapse in oil demand, but
the surge in oil inventories also exerted downward pressure
on oil prices. Second, this latest oil price decline was
preceded by six previous plunges over the past half-century,
during which energy exporters and importers suffered similar
initial output losses (about 0.5 percent) that were unwound
within three years. Third, the current episode of low oil
prices holds limited promise to boost the global economy
amid widespread restrictions and narrow room for fiscal
support in energy-exporting emerging market and developing
economies. Fourth, many emerging market and developing
economies entered the current public health crisis with
precarious fiscal positions; current low oil prices are thus
an opportunity to review energy-pricing policies, including
remaining energy subsidies, to mobilize domestic resources. |
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