Pint of Beer vs Barrel of Oil - What's Cheaper?
Apr 16 2020 Read 529 Times
In a comparison that has captured the attention of hops lovers around the world, a CNBC report has revealed a pint of beer now costs more than a barrel of Western Canada Select (WCS). With the average price of beer in Canada around US$5 a pint, and WCS trading at around US$4.70 a barrel, the heavy crude oil is now cheaper than a pint of Budweiser or Molson Canadian Lager.
Benchmark oil prices plummet
WCS isn't the only oil that's experienced a price crash, with US West Texas Intermediate (WTI) and Brent crude also hit hard by the COVID-19 pandemic. The oil market is currently facing the lowest demand seen in 25 years, which has sent WTI and Brent crude prices plummeting. On Wednesday, the benchmark price for Brent crude fell by more than 5% to US$28 a barrel.
The International Energy Agency (IEA) warns the global lockdown caused by COVID-19 could have a severe and long-lasting impact on oil demand, with expected drops of more than 9 million barrels per day in 2020. "Even assuming that travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020 will fall by 9.3m barrels a day versus 2019, erasing almost a decade of growth," reads the April 2020 report issued by the IEA.
Oil endures a global slump in demand
A nationwide shutdown of the Chinese economy is one of the biggest factors, triggering a global slump in demand. The collapse meant storage facilities in both Canada and the United States were suddenly overwhelmed, which sparked concerns over a huge surplus. The price crash was also spurred by tensions between Russia and Saudi Arabia, who engaged in a price war that's since been resolved with an agreement to slash production by 10 million barrels a day. This represents around 10% of the world's total supply, with hopes the agreement will help to stabilise prices.
The warning from the IEA came just hours after the International Monetary Fund released a dire prediction the world could be about to face the deepest economic recession seen since the Great Depression of the 1930s.
While the outlook is bleak, the IEA has offered a glimmer of hope, saying with a collaborative approach stability is possible. "There is clearly a long way to go before we can put the Covid-19 crisis behind us. However, we are encouraged by the solidarity shown by policy makers from producing and consuming countries working together to meet this historic challenge of bringing stability to the oil market," concludes the report.
To find out more about what's ahead for the global energy market, don't miss 'The Only Certainty is Uncertainty for Corona-Stricken Oil Industry.
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