Oil and Gas Industry Amidst Coronavirus
The pandemic COVID-19 has brought the Gulf to a standstill. All the countries in the region had to shut down parts or full economy to control the virus spread. Businesses are shut to halt virus transmission. Curfews are being imposed to restrict people from gathering.
On the economy front, the impact of coronavirus pandemic is severe. Demand has slowed down. Major revenue-generating sectors like tourism, logistics, and airlines have come to a halt. What about the oil and gas industry, one of the major revenue generators for UAE?
The Price War
Until a few days ago, things were looking grim for the oil and gas industry. The oil price war of Saudi Arabia against Russia had led to the steepest fall of oil prices since 2002. While the low oil prices benefited the importers, the oil industry was facing a grave threat. Revenues started to fall and had put the economy under pressure.
But fortunately, good sense prevailed, and the Organization of the Petroleum Exporting Countries (OPEC) decided to cut back crude production, and oil prices began to rise. While the oil price is getting rationalized, a grave threat is emerging for the oil and gas industry.
The Great Demand Fall
The coronavirus pandemic has put the whole world under lockdown. Almost all the major economies of the world are shut, barring China. Factories are closed, transportation came to a standstill, and people locked down themselves in their homes. The result of all these is the steepest fall in demand for oil in the world.
The unprecedented demand fall is breaking the back of the fossil fuel industry. Already, the oil price war has led to halving the stock market valuation of oil-producing companies. This is hurting the industry, and many are losing jobs. The demand fall will further aggravate the problem, and one can expect unemployment.
Small oil-producing companies will shut their shops. With no demand, extracting oil is a costly affair. Big companies may see a steep fall in their revenues. If there is any extension in shutdowns or lockdowns across the world, the oil industry itself will see a permanent change in its course.
Impact on the Economy
UAE is expected to recover sooner than other countries in the region. Today, the country is not much dependent on revenue from oil than before. It has been shifting its investment to the non-oil economy over the years. As a result, the oil industry now accounts for 30% of the country's revenue from a high of 90% in 1975. The country is also one of the first to take proactive steps. A stimulus package for its private sector and the oil and gas industry has been launched.
Will Bounce Back
The future of the oil and gas industry is very uncertain. The coronavirus pandemic can push the industry in either direction. If history is any indication, the oil and gas industry can bounce back.
Move To Digital
With the customers trapped inside their houses with their mobile devices, internet connections, and a lot of spare time, naturally these customers are on a constant lookout for entertainment and engagement activities to pass their time. Brand around the world are taking advantage of getting their potential customers attention in the hopes of achieving marketing objectives like, online user engagement, brand awareness and recall, lead generation and making revenue through online purchases by the customers online.
The pattern to notice over here is that every business is opening its revenue streams through online channels by creatively reaching out and converting potential customers online.
We here at ICS Dubai specialise in digital transformation of business to help them thrive through the wave of recession. Reach out to us through our website www.ICS-Dubai.com to know the best way ahead for your business!