Describe the current state of the oil market and how it has been so affected by the coronavirus that it has almost shut down the Canadian economy and economies worldwide.
The oil industry has been badly hurt by the global economic collapse caused by the spread of the Covid-19 virus. Demand for oil has dropped enormously, with obvious repercussions for economies dependent upon oil production and exports. Canada’s economy is among those seriously affected by the drop in oil prices, at its oil sector accounts for a significant percentage of that country’s Gross Domestic Product.
The oil market has been devastated, at least in the short term, by the global pandemic. With governments around the world imposing draconian “stay-at-home” rules in attempts at stemming the spread of a virus that has killed more than 300,000 people around the world and affected around five million more, economic activity has ground to a halt. Businesses are shut down with employees required to remain at home.
The result has been a major reduction in demand for oil. With far less traffic on the roads, much less fuel is being consumed. With the drop in demand for oil, prices have plummeted. Countries economically dependent on the production and export of oil are, consequently, experiencing significant contractions in levels of economic growth. Canada is no exception. Canada’s economy is closely tied to exports, with exports of oil accounting for ten percent of that sector. Precipitous drops in demand mean major reductions in revenue for Canada and other oil-exporting countries.
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