The COVID 19 lockdown and insane oil price war between Saudi Arabia and Russia turned the US oil price negative for the first time in history. It totally reflected on the poor demand and sudden surge in relative supply at the same time.
(From $63.83/Barrel in January 2020 to -$37.63/Barrel present)
So how it happened?
Let’s look over some actual scenario, and then we will look into its drastic impact, basically on the environment.
The first and totally unpredictable cause was the collapse in demand due to contagious COVID 19, but for the sake of convenience, we will keep this part constant. This assumption is made just to remove complexity as it’s unpredictable–the reality that we are unsure when we will reestablish.
Moving to the second cause, which is quite important. It is the sudden surge in supply; it’s interesting as it happened due to insane price war occurred between Russia and Saudi Arabia (Due to Russia’s unexpected backing off from the oil agreement which was signed between Russia and Saudi Arabia, wherein Moscow agreed to deepen the cut in the supply of oil) which eventually led Saudi Arabia to take revenge by producing tons of oil without cutting supply.
As oil is one of the biggest commodity of the world, the fall in the price will have an impact–both direct and indirect effects on our daily life. However, can you believe that the oil price dip will affect even the environment?
How oil price drop will impact the environment?
Oil prices have both direct and indirect impacts on the environment. With reduced prices the demand for the same will increase. Here are some of the ways in which the environment will be hampered.
- It will give a big relief to consumers at the gas pump, and psychologically it will motivate them to use more and more fossil fuel products, which in turn will increase carbon emission, and this will be seen mainly in importing nations like China.
- When relative supply inflates, it will lead to a fall in the price of oil.
- As electric cars and fossil fuel cars are substitutes for each other, so due to relief in the price of oil, the consumption of fossil fuel cars will increase. Individually people will feel more beneficial in using fossil fuel cars (Reducing demand of E-Cars, which are Eco-Friendly)
- As cars using fossil consumption rise, the carbon emissions will increase, which will affect our environment drastically.
Therefore this is the basic explanation describing the role of the surge in relative supply in disruption of the environment and showing how substitutions of goods will take place affecting the environment as well as different projects which motivate E-Cars.
- One more way to look over this impact is that surge will require more hydrocarbons (HC) tapping, which will also disrupt this environment.
Thus we need to understand that every positive aspect will have some or the other drawback and vise versa. Humankind needs to think to avoid a much more drastic outcome post lockdown.
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