Global oil prices are witnessing a historic decline amid novel coronavirus pandemic & lockdowns which has dramatically affected the fuel consumption worldwide. Also for the first time in history, the price of US oil has turned negative.
This means oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in coming month. Demand for oil has all but dried up as COVID-19 lockdowns across the world have forced people to stay indoors. As a result, oil firms have resorted to renting tankers to store the surplus supply and that has forced the price of US oil into negative territory.
The ongoing COVID-19 crisis has helped us learn quite a few important things. Such as, healthcare professionals are worth more than celebrities & sports legends, our planet can regenerate quickly without human interference, most of the people can easily work from home, everyone can survive without consuming junk food, spending time with family & loved ones brings peace of mind & endless joys & actors are not heroes but only entertainers etc.
And most significant is the fact that anything no matter how precious it is has no worth in the society without utilization. If people collectively stop buying a certain thing even for a smaller period of time, the prices will dramatically come down making it unbelievably affordable.
In most markets around the world, automakers have already witnessed a drastic decline and even suffered from zero sales in a month. In Pakistan too, auto assemblers are observing plant shutdowns since 23rd of March and have recorded zero sales since then. The sales of local automobiles which were already on a decline have come to a complete stop now. And with that, another positive thing that has happened in these days of lockdowns is that people have started to love their existing cars.
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There were a good number of people in Pakistan who used to sell their existing 5th gen City only to spend a few hundred thousand more to buy a 5th gen City again, and such examples can be seen in probably every other segment when people sell their existing cars only to buy the exact same vehicle from the showroom just because it smells new. This also stopped innovation since automakers keep selling the same car while periodically increasing the prices without introducing any significant improvement to the vehicle or its equipment. With COVID-19, people have now realized it’s rather easy yet cheaper to maintain their existing car than to replace it with the identical model standing in the showroom floors.
It’s also a good example for people who believed low sales can’t bring results in favor of consumers. Well the low fuel demand is perhaps the perfect example since the entire supply chain is disturbed if there is a bottle neck at the end point. And companies need to clear the stocks in order to keep their wheels spinning, if not then they will make sure the stocks are cleared toot-sweet & may even slash their profit margins to achieve that.
The world will be a very different place, socially as well as economically whenever the clouds of coronavirus pandemic are cleared, and the impact will be seen here in our country as well. The road isn’t going to be the same for local auto industry as consumers will be spending more on essential goods and services, and cars may be far from their minds. And with people now learning to value their existing rides, will they ditch the likes of their Honda City to buy another Honda City again, will be an interesting thing to see.