IEA Head : Oil price war will harm coronavirus fight

The head of the International Energy Agency (IEA) has accused Russia and Saudi Arabia of damaging efforts to stop the spread of the coronavirus if they continue the oil price war, saying that poorer countries that are exporters of crude oil will struggle to cope as revenues fall.

In the strongest condemnation of a price war that has gone a long way to upending world markets this week, Fatih Birol, head of the Paris-based IEA, blasted the two countries' governments, branding them "irresponsible" and accusing them of having a callous disregard for the global threat posed by the coronavirus. 

“The world is facing a major challenge in fighting against coronavirus,” Birol said in an interview with the Financial Times. “I find it at best irresponsible that they are having a price war now. The people of the world will not forget who was on the side of fighting the virus, and which countries were on the side of making the fight much more difficult.”

He continued by saying that oil-dependent countries such as Algeria, Iraq, and Nigeria could be faced with huge budget shortfalls because of the almost 25% drop in oil prices this week, with economies already under strain from the coronavirus threat.

Last week, an alliance to prop up oil prices by restricting production ended acrimoniously, and now both Riyadh and Moscow have threatened to flood the market with additional barrels of crude oil.

Demand for oil has fallen as airlines ground flights and travel is restricted in various countries. China and Italy have locked down large parts of their countries in the past two months. 

Through connecting the oil price war to the spread of the coronavirus, Birol has been seeking to emphasise the danger of destabilisation of energy markets at a time when the global economy is already struggling to adapt to the COVID-19 virus, which has already killed over 4,000 people worldwide.

Since the spread of the virus began in Wuhan, China, last December, more than 113,000 people have been diagnosed.

Both Russia and Saudi Arabia have one eye on hitting the US shale industry, but Birol, a Turkish economist with a background in Opec, has said that the strategy is misguided. “It is too quick, and wrong, to write the obituary of shale at current prices. Shale will come back,” he said.

US shale is more expensive to produce that hydrocarbons in Saudi Arabia, which makes it vulnerable to low prices.

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