Lead by Juba in stabilising global oil prices welcome, deserve Opec backing
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As the world grapples with the menace posed by coronavirus, it is important also to look at the other threats associated with its devastation to global economies. No country has been spared and there is every chance that the aftermath of the pandemic will be felt for months long after it has been contained.
Who would have imagined that the United States, the most powerful country in the world would be forced to ask for foreign support to contain the virus? It is happening and it is humbling.
The pandemic has affected global oil supply with the price of the precious product tumbling to a third of its value at the beginning of the year when it was trading at SSP17,400 ($60) per barrel. The US, which was producing 11 million barrels per day at the start of the year, has been forced to abandon production after the price of its oil tanked to SSP2,900 ($10) per barrel.
It is projected that unless there is a dramatic shift in production in the Middle East and Russia, which produce more than half of the world’s crude oil, the United States will become a net importer of oil aa the low prices of its oil will not economic sense.
This is where the mediation role South Sudan is playing to bring Russia and Saudi Arabia to an understanding becomes important and should be appreciated, and supported.
Petroleum Minister Puot Kang and OPEC Secretary General Mohammed Sanusi Barkindo have initiated talks aimed at narrowing the gap between the two major oil producers. The two are torn between reducing production to force the price upwards or increasing production to further force the US into importing oil.
At the centre of the push and pull is the status of the world economy already hurt by the coronavirus pandemic. Worldwide, industries have closed down, with the consequence being massive loss of employment. No country is spared the job losses as economies grind to a halt. It is possible we are yet to see the worst of the economic crush and its impact on humanity.
The initiative by Mr Kang, therefore comes at an opportune time when South Sudan is looking to put behind it the adverse effects of a six-year civil war. Therefore, low crude oil price poses a major challenge to South Sudan, an oil producing country. The economy of the country depends on oil, which finances more than 70 per cent of the national budget.
In the absence of oil revenue, it is going to be difficult to overcome the challenges posed by coronavirus. Trade with the neighbouring countries is critical and is feasible only if the government is able to facilitate imports and exports. Because of the pandemic, business has been scaled down as region struggles to minimise the spread of the virus.
The diplomatic lead Juba is undertaking to stabilise global oil prices and output is welcome. It is for the good of the people of South Sudan and the world at large.
