From Goldman Sachs research, this is Alison Nathan. Welcome to Top of Mind, a podcast that explores

macroeconomic issues on the minds of our clients.

In this episode, we're focusing on developments in the global oil market over the past month,

which has been hit hard by simultaneous shocks amid the continuing coronavirus outbreak.

First, there's the almost unimaginable demand shock owing to the outbreak,

with demand for transportation fuels plunging as the world economy heads into recession.

The other shock involves OPEC and the collapse of the historic 2016 agreement

between those member nations and Russia, together known as OPEC Plus,

to coordinate production cuts in the face of growing non-OPEC supplies of oil.

That collapse has led to a supply shock as Saudi Arabia,

Russia, and other OPEC producers engage in a war for oil market share. Although increased pressure

from the United States has led to the prospect of a new round of coordinated cuts from major

producers to help reduce the current oil glut, geopolitical tensions

are escalating, and any feasible cut might prove to be too little, too late, given the magnitude

of the demand loss. The implications of the simultaneous demand and supply shocks for oil prices,

OPEC, the oil industry, and beyond, is top of mind.

To get some perspective on all of this, I first turned to Pulitzer Prize-winning author, Daniel

Yergan, who put the current oil shock into historical perspectives.

Is this the biggest oil shock you've ever witnessed?

This is the biggest oil shock because it's global and it comes at a time when the

global economy is largely shutting down.

I think the one that's most analogous to it in some ways is 1998 when oil production was

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