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Prior to the coronavirus outbreak, high-mileage engine oils were in great demand due to properties that help in oil leakage and reduction in oil-burn offs. It was anticipated that increasing production and sales of light-duty vehicles would positively impact the engine oil consumption. But the outbreak of coronavirus has directly hit the automotive engine oil market.
The pandemic has forced two-thirds of the world’s population to stay indoors, which led to a downturn in demand for engine oil. Engine oil is one of the derivatives of crude oil which lubricates the inner components of internal combustion engines besides protecting them from corrosion. The engine oil market further got affected due to the withering demand for crude oil.
Crude Oil is Facing the Gravest Challenge of Savage Price War and Coronavirus Pandemic
The demand for crude oil is withering due to the coronavirus outbreak that originated in China, spread further beyond the country. The pandemic has created a long-lasting problem among OPEC and OPEC+ member nations. A skirmish between Russia and Saudi-Arabia on a price-cut to stabilize oil prices have spiked the oil prices at 21 % in a day last week. Major crude oil producers are contemplating to cut output to support the market. OPEC+ has been withholding supply from the market to support prices for several years now and is anticipated to further restrict production.
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In March the crude oil barrel quoted at USD 55-60 per barrel and now it is trading at USD 25-27 per barrel in April. There is a sharp fall in demand for crude oil from China, who is the world’s biggest importer of crude oil. India imports 80 % of its annual requirement of crude oil and bills run into billions of USD. Due to quarantine, lockdown and restrictions on travel impacted the demand for crude oil in these regions. The outbreak of coronavirus has impacted the US, which is the world’s largest oil-consuming nation and the largest producer and exporter of oil ahead of Saudi-Arabia.
Automotive Industry Crippled by Coronavirus
Auto companies across the world are shutting their doors in the wake of coronavirus pandemic. Though the crisis could turn out to be positive for the aftermarket sector as the pandemic is going to lower the replacement of existing vehicles in use thus creating an opportunity for repair and maintenance parts and components.
Nissan – To soften the impact of the coronavirus, it has requested a US$ 4.6bn commitment line from major lenders. Factory shutdown has resulted in production loss amounting to 1,465,415 motor vehicles to date (figure published by European automobile manufacturers Association)
Visteon– reduced its operational cost in response to the coronavirus crisis
BYD– In the light of the coronavirus pandemic, it has outlined its European operations situation.
Volkswagen- decided to extend its operations to safeguard the supply of parts to plants in China and started the production of emergency ventilators at its Martorell facilities.
Benteler– Donating face mask holders to the Galician Health service
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Japan’s new-vehicle market shrinking by 9.2% by March 2020. New Zealand’s motor Industry association reported down in registrations by 37.3% Year on year. India a heavy energy consumer imports 80% of its oil needs. Due to the pandemic, petrol, diesel demand has slumped by 66% and ATF consumption fell to 32.4% in April. On the brighter side, falling oil prices helping to keep inflation in check, reduced fuel subsidy thereby leaving more resources in the hands of the state for public spending. Dramatic fall in demand due to lockdown has led the government to direct state refiners to place their excess crude supplies in national caverns.
Governments Giving A Breather to Fossil Fuel Companies Who Are on Life Support
To invigorate coronavirus -wracked global economy, G20 nations doled out $5trillion, whereas European Union Leaders promised to take their emergency measures to align with their Green deal program and pour investments into energy technologies that cut greenhouse gas emissions. The US is offering low interest to fossil fuel companies and doling out the US $2 trillion coronavirus relief package to struggling airlines. The Canadian government has announced to give loans to its oil companies who are on life support.