The world is reeling

Mar 12, 2020 Editorial

Price war, a disease of warlike proportions, and a prediction that might as well be a declaration of war on Guyana’s immediate economic future. There is this convergence of circumstances that points to the suddenly precarious position of the embryonic Guyana’s oil economy.
The very things fought over – the money and power – have now assumed temporarily the trapped look of a deer in the headlights. Still, we remain uninterested, even paralyzed, due to our own internal wars here over who won, will win, and who should have won.
In view of what is unfolding with racing swiftness in the world at large – the real world -the streams of returns anticipated, for at least this year, look beyond reach and with increasing certainty.
The Saudis have gone on the offensive and taken aim at price, in an effort to remove the profit incentive from the competition and bring it to its knees. The end objective is be rid of those thorns in the gullet and resume comfortable command of the oil markets, oil supply, oil prices, and the world of oil. There is some good news behind the current dark oil clouds for Guyana, but it would not be forthcoming anytime soon.
We are going to have to wait, as in empty-handed, with nothing to show for the barrels per day of production that leave these shores.
It appears that the next couple of quarters, maybe the whole of 2020, are now lost to sharp volatility, mainly downward, being experienced in the world markets, and as evidenced in crumbling price futures.
With prices in the lower $30 a barrel range, American shale producers are reeling, debt weighs heavily. Now if their supply is no longer profitable and has to be severely curtailed, which looks high likely, then there would be some upward movement in prices from the bottom, which has not been reached.
No less an authority than Goldman Sachs has sounded the loud gong of $20 a barrel, which would be the pits for Guyanese and their hopes and dreams, the same ones over which we are battling bitterly. Let us hold off for a moment on the contemplations and implications of the unthinkable of $20 a barrel.
Even at $30 a barrel, there is little, if anything, by way of upside entries in the accounting ledgers on our behalf. The point is that while we are devastating ourselves locally over elections impasses, what is happening on the international front is transforming – at least for the near future of the rest of the year and beyond – our oil into a near useless presence, contributor, and asset. And still we continue with our untroubled Titanic moment, while the world crashes around us.

To repeat what is now well known, COVID-19 has decimated demand. Gasoline is below $3 a gallon in the US, but workers and drivers are forced to stay home, whole communities under lockdown, and countries in Europe signaling their intentions to close their borders and take drastic protective actions.
Airlines are under siege with travel demand plummeting, and with this being the depressing picture in society after society, and sector after sector, the demand for oil at any price continues to diminish.
Inventories pile up as a standstill intensifies its widening presence. Oversupply is the understatement of the day, which means further price compression and which, in turn, extends the bad news for Guyana. But we continue to rage at each other unthinkingly and dilute the potential for prospering from the petroleum properties that abound.
We are unhearing of and unheeding to the fact that that over which we devour each other loses some of the glitter that mesmerizes us, like Midas, into madness. We are turning one another into golden monuments of utter stupidity. The evidence is there and so, too, are the strains and cracks that are making themselves more visible, more obvious.
The world of oil promises to remain sharply choppy in the months ahead. The world of Guyana currently presents the same picture of stormy upheavals for the near and intermediate future, with little end in sight. Settling elections controversies will not put an end to anything. Unlike oil in the long run, our upswing towards the positive looks remote.

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