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“I love cheap oil because it gives me very cheap gas,” Varney said. “But today, oil prices crashed, and that’s real bad. Yes, gas will get even cheaper, but the repercussions from $14 a barrel oil are just plain terrible.”
Varney said the American energy industry is at risk.
“America’s drillers and frackers can’t survive $14 a barrel oil. They were having a hard time at $30 -- $14 is bankruptcy-land,” he said. “They are even running out of storage space! They will need massive government support, and even then, not all will make it. The oil crash is a direct threat to America’s highly successful energy industry.”
Varney also said low prices also harm other economies that depend on oil.
“Russia is a big loser. Its entire economy rests on oil. It is a ‘petrostate.’ Even Vladimir Putin has to worry when his country is locked down, and the main pillar of its economy is collapsing,” Varney said. “You can say the same thing about any country that relies heavily on oil. Most OPEC members are in deep, deep trouble. Even Saudi Arabia is looking at a ruinous decline in revenues.”
However, Varney noted that China is a "winner" and gaining a competitive edge.
“China has to import almost all of its oil, and at these price levels, China can supply juice to its factories at rock-bottom levels. That is a competitive advantage, especially since those factories are now re-opening, while the rest of the world is at a stand-still,” Varney said. "We may be unhappy with Beijing’s handling of the virus, but they have been handed an economic advantage: Maybe that’s why they chose to arrest democracy advocates in Hong Kong over the weekend. The oil crash makes them stronger."
Varney noted that the coronavirus has cut global demand by an estimated 30 million barrels a day, but getting people back to work is the only way to get prices back up.
"The producers can cut production by as much as they like, but the price doesn’t go back up until the world gets back to work. And we can’t enjoy cheap gas until we start driving again, and that won’t happen till we get back to the daily commute, vacations, and visiting our friends and relatives," he said. "The oil crash is a shocking demonstration of just how badly this virus has hit us all!"