Only Largest US Oil Producers Likely To Survive Price Collapse - Ex-EU Consultant

WASHINGTON (UrduPoint News / Sputnik - 23rd April, 2020) The US oil industry will have to go through an enormous reorganization after the collapse in prices� and the biggest players are the only ones likely to be left standing, former EU consultant and current president of the Global Policy Institute Paolo von Schirach told Sputnik.

Earlier this week, the West Texas Intermediate (WTI) crude oil price benchmark fell into negative territory for the first time in history.

"Only the biggest oil players will be able to weather this unprecedented disaster," Schirach, who is also professor of international affairs at Bay Atlantic University, said. "But even those will have to lower jobs. ... The post-epidemic oil sector will be leaner. It will be streamlined."

The current crisis was hammering an overextended and disorganized US oil industry that had grown to large, too fast, Schirach explained.

"Now, we have a veritable price collapse that is hitting a fragmented universe of small and medium sized energy companies that were already in shaky financial conditions on account of the heavy debt load they were carrying," he said.

Most of the smaller US oil producers were unlikely to survive the current turmoil, Schirach warned.

"If we do not see pretty soon a dramatic rebalancing of global demand and supply that would translate into oil prices back to where they were in 2019, most small and even medium US players will be unable to survive. Some are already mortally wounded," he said.

This crisis was bound to pose a wider danger to the US economy and to hopes of a rapid recovery from the pandemic crisis, Schirach explained.

"The virtual destruction of the oil sector (at least for some time) will certainly have wider implications for America.

Over more than a decade, this expanded oil sector had created tens of thousands of well-paying jobs, spread around many states," he said.

The damage would be particularly acute in the Heartland states that had prospered so dramatically from the fracking boom over the past decade, Schirach pointed out.

"Oil had boosted local economies of backwaters like North Dakota, a mostly agricultural state prior to the fracking boom. ...With the collapse of oil prices, most of these jobs will be gone," he said.

This devastation would add to the already gigantic employment collapse caused by the freezing imposed on manufacturing and the hospitality and travel industries by the COVID-19 crisis, Schirach predicted.

"The longer oil prices stay this low, the bigger the pain for out of a job oil workers, and thus for America," he said.

Even a quick end to the pandemic and a vigorous restart to the global economy would be unlikely to prevent or reduce the devastation to the US oil producing sector, Schirach cautioned.

However, eventually, demand for oil both in the United States and around the world would revive again, Schirach advised.

"Manufacturing will restart, jobs will come back, people across the globe will buy new cars, and they will start flying again. This means that demand for oil and oil products (gasoline, diesel, jet fuel and more) will pick up. Therefore, oil prices will recover," he said.

There remains no plausible alternative to oil as the Primary source of energy fueling the planet, Schirach concluded.