Conclusion

Shokri Kalehsar, Omid

Energy will play key role in US foreign policy in the future. Since its inception in 2008 the US shale oil industry has never been a profitable industry. If it were judged by the strict commercial criteria by which other successful companies are judged, it would have been declared bankrupt years ago. US shale drillers have been encouraged by easy liquidity provided by Wall Street and other investors to continue production even at a loss to pay some of their debts. In so doing, their outstanding debts have mushroomed to almost $1 trillion leading to large number of bankruptcies among them. Oil demand was corrupted or rather destroyed before novel coronavirus. Oil demand would have been damaged even without the spread of deadly virus. It was already fragile and nearly down to its knees. Coronavirus was a deadly blow to oil demand. It has seen two major oil collapses back in 1985–86 and 2002–03. The two sharp oil price falls took about two years each to recover. Current market volatility is uncertain. The two past market collapses were a combination of oil market fundamentals plus geopolitically motivated circumstances. In case current situation proved worst and US economy entered a depression mode, duration of low oil prices could be even longer. US oil exports will always be challenged by the international price climate. The COVID-19 pandemic could go into history as the largest destructive event that has hit the global economy since the Great Depression of the 1930s. There are indications that its adverse impact could be even bigger than the Great Depression of the 1930s. Many ideas are being considered for bailing it out including an import tax or tariff on all foreign oil imports to the US. But this will not work since major crude oil exporters to the United States will shift their exports to the bigger market of the Asia-Pacific region rather than pay the tax.