(gentle music)
- [Narrator] The coronavirus
has emptied out cities.
Fewer people are driving
cars or boarding planes.
Factories are idled.
As a result, the world
is burning less oil.
But many of the world's
major oil producers
have been pumping more than ever,
leading to a crash in oil prices.
Low prices normally put cash
in the pockets of drivers
and fuel-burning businesses like airlines.
But this is different.
- Consumers like low prices,
but in today's environment,
where so many people are quarantined,
the people cannot benefit
from low oil prices,
so there's no winner in
this current situation.
- [Narrator] Analysts say that
the current bust is so bad
it could radically reshape the oil market.
Here's how we got here.
Oil producers' most pressing problem
is that a lot of people
don't need its products.
By April, the consumption
of petroleum in the U.S.
Had fallen to the lowest
levels in at least 30 years.
Demand for gasoline has
declines by nearly half
since mid-March.
Jet fuel consumption plunged
by more than 70% since then.
The trend is similar around the globe.
It started in China, where the
first of billions of people
around the world began to shelter in place
to slow the spread of the deadly virus.
- For 2020, oil demand, oil
consumption will decline.
It increased every year, but it decline
because of what's happening in China,
what is happening in the global economy.
This is one reason.
- [Narrator] By late March,
billions of people around
the world were staying home.
Analysts estimate that
global demand for crude oil
will decline by about a third,
or about 30 million barrels
a day, during the pandemic.
Meanwhile, oil is piling
up with nowhere to go.
Pipelines are filling.
Refineries and storage tanks,
like these, are brimming.
And some oil is being
stashed at sea on ships.
That's because the global pandemic arrived
right as production around
the world was surging.
In recent years, the Saudi-led
Organization of the
Petroleum Exporting Countries
and other nations, like
Russia, have coordinated
production cuts, intended
to prop up oil prices.
They were working together to buoy prices
as U.S. producers flooded the market.
But the truce was short-lived.
In early March, Russia and Saudi Arabia
couldn't come to terms
on a new round of cuts.
Then Saudi Arabia turned on its taps.
- Market turmoil is about
more than just the virus;
oil prices suffered historic
collapse late Sunday
after Saudi Arabia shocked the market
by launching a price war
against one-time ally Russia.
- [Narrator] Meanwhile, U.S.
producers continued to pump
even as prices fell.
U.S. production hit a record
of 13.1 million barrels a day
in late February and stayed
around there through March.
U.S. companies were
reluctant to slow down,
having borrowed heavily in recent years
to drill wells, build pipelines,
and maintain fleets of
expensive machinery.
With billions of dollars
of debt coming due,
they couldn't afford to stop pumping.
But by late March, already low oil prices
had fallen by more than a half.
And the pain became unbearable.
You can see it in this chart,
which shows the number of drilling rigs
in Canada and the United States.
The drilling rig count declined
as companies cut their
budgets in mid-March.
By April, U.S. production began declining.
In April, Saudi Arabia and Russia,
where the governments are
supported by oil sales,
rekindled their market alliance.
They convened a group of
23 oil producing nations
who agreed to once again restrict
output and support prices.
They agreed to reduce
their collective output
by about 10 million barrels a day.
So far, the market has not been impressed.
Goldman Sachs analysts called it
a historic yet insufficient cut.
Oil prices fell when
trading opened the next day.
- What's a really fascinating question
for the energy industry,
for the oil industry,
is will this dialogue
between Saudi Arabia,
Russia, The United States and others,
will it endure beyond
the immediate crisis?
We could be entering a new
era of international dialogue
on the oil market of the
like we've never seen before.
