We are witnessing the greatest fall in the value of the world’s most valuable commodity. Oil prices crashed at a negative $39.14, negative for the first time in history. The price of crude oil limped to less than $1(80p) – making it cheaper than a packet of sweets.

There are many reasons which led to this fall. The coronavirus epidemic dried up the demand for air travel, sea cargo, road travel etc. Low demand has led to piling up of inventory. The rule in the field of economics is that when the demand decreases, the production must also be decreased in order to keep the value of the product. Secondly, there are no storage facilities left. The excessive production of oil needs reserves to keep it. The world and oil-producing countries started running out of space to keep the oil. This led to a situation where the producer would even pay the consumer to take the oil. The lack of demand and increase in supply is the reason for the fall of these prices.

The only solution to this issue would be to cut back on production. However, most countries are still producing at the same rate or have decreased production but on a very minimal scale. It is time for the fossil fuel industry to recognise that, from now on, the cheapest and best place to store oil is in the ground. The slumped price of oil will gradually increase when the global lockdown eases and import and export activity resumes. The oil price has thus a direct correlation with COVID-19.

Barely four months into 2020 and we have seen the worst already. We were taught that these essential assets prices can never go down to negative, but miracles happen if there is a global pandemic.

SHOAIB LASHARI,

Larkana.