The blow has forced West Texas Intermediate crude oil, the U.S. benchmark, down 55 percent to $28.25 a barrel.
While much of the focus has been on the crude oil market, which received a small boost from President Trump ordering the U.S. Strategic Petroleum Reserve to buy crude at depressed prices, the declining demand for gasoline has flown under the radar.
The U.S. is “by far” the world’s largest gasoline user, and “demand destruction remains likely in the early innings,” wrote Michael Tran, commodity strategist at RBC Capital Markets. U.S. gasoline prices at the pump have fallen from $2.60 a gallon at the beginning of the year to $2.19.
Tran pointed to coronavirus-prevention measures such as social distancing and working from home as practices that could contribute to a 30 percent plunge in demand, which was the size of the drop suffered in China when large swaths of the country were locked down.
The COVID-19 outbreak, which has sickened 5,613 people in the U.S. and killed 94, according to the latest figures from Johns Hopkins University & Medicine, has forced some consumers to shelter in place, paralyzed supply chains, brought travel to a near standstill and wrought havoc on markets and the economy.
“A protracted slowing of U.S. activity could have a devastating impact on global oil demand given that America comprises nearly 20 percent of world consumption,” Tran wrote.
If that weren't enough, Saudi Arabia and Russia have been engaged in an oil price war after the latter refused to join OPEC in cutting production, causing the former to dramatically lower the price of oil for its customers and raise output.
The sharp drop in prices has had a material impact on citizens of developing countries that rely heavily on income from oil and gas reserves.
On a conference call on Tuesday, Dr. Fatih Birol, executive director of the International Energy Agency, and Mohammad Sanusi Barkindo, secretary general of OPEC, discussed the consequences of the oil crash on those countries and concluded they would likely see their income from oil and gas fall by 50 percent to 85 percent in 2020 if the current market conditions continue.
Such a decline would lower their incomes from energy to the lowest in more than two decades, according to the IEA.
“This is likely to have major social and economic consequences, notably for public-sector spending in vital areas such as healthcare and education,” according to a statement on the call.