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The Airline Industry Has Been Hit Hard By The Oil Price Plunge

The effect of the COVID-19 pandemic has damaged the oil and gas industry just as much as it has all others. The primary effect was a huge and immediate price plunge which threatened to linger for some time. With this massive price plunge, the experts correctly expected that it would hit the airline industry hard enough to send some people out of business. The leading U.S. oil benchmark cost went down by more than $50 per barrel to end the day about $30 below zero last spring; the first time oil prices have ever turned negative. Such eye-popping instances are a rarity in the supply and delivery of contracts and physical inventories the oil market, but it underscores the industry’s disarray as the coronavirus pandemic decimates the world economy.

Journey of oil prices from 1960 to 2021

If you review the historical per-barrel price for oil from 1960 to 2021, you will find that the price was below $3 till 1973. After that, it started increasing and reached $35.52 in the year 1980. After lots of ups and downs, it reached $94.1 in the year 2008, which extended over the expected range relative to inflation from decades prior. The price reached its pinnacle in 2012 with $109.45 a barrel. After that, the price started decreasing as overwhelmingly more supply came online due to the advances in on shore fracking for countries which were typically net importers. During the pandemic in 2020, the price was $41.47 a barrel. After that, the curve has taken a quick run up in the past few months and reached $57.72 a barrel.


Decreasing demands of oil

The gas and oil market consists of gas and oil sales by entities that undertake the exploration for, extraction, drilling, and refining, of oil and gas and some of its derivatives. The gas and oil market is segmented into gas and oil upstream activities and downstream products for oil. Worldwide demand had collapsed spectacularly last year, and it’s hitting the airline industry so hard to this day. Despite a deal by Saudi Arabia, Russia, and other nations to cut production, the world is running out of places to put all the oil the industry keeps pumping out — about 100 million barrels a day. At the start of the year, oil sold for over $60 a barrel, which is quite a recovery considering the price collapse from the year prior.

Impacts to the travel industry: a notable example

Virgin Australia Airlines announced that it had entered voluntary administration after the Australian government refused a bailout for the company of 1.4 billion Australian dollars. The airline officials said they hoped to recapitalize the business to emerge stronger after the coronavirus crisis to regain it once slowly, but in the meantime, they would operate scheduled flights for transporting moving freight, essential workers, and returning Australians home.

How the oil industry affects other industries?

The oil and gas industry’s major end-user markets (including airlines) are looking into big data analytics and artificial intelligence (A.I.) to enhance decision-making abilities and drive profits just as this upstream industry does in sourcing raw crude. The companies gather vast amounts of raw data relating to pipelines, refineries, and other infrastructure through many sensors placed across the oil rigs. Using big data analytics, the companies can detect patterns that can quickly react to unwanted changes or potential defects, thus saving costs. A.I. allows the companies to make better drilling and operational decisions and will continue to do so as advancements are made well into the future.

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