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South Africa: Oil prices drop: What will fuel the energy industry post-COVID- 19? On April 20, 2020, the global petroleum industry witnessed a historic plummeting of benchmark US oil below $0 a barrel
South Africa: Oil prices drop: What will fuel the energy industry post-COVID- 19? On April 20, 2020, the global petroleum industry witnessed a historic plummeting of benchmark US oil below $0 a barrel. Brent crude oil also has fallen nearly 70% from the beginning of the year. The drop in oil prices raises questions about the future of the global and regional energy industry as well as the role of fossil fuels in the transition towards a more sustainable energy future after the pandemic economic lockdown. Source: adapted Norton Rose Fulbright. South Arnca: O prices drop: What will fuel the energy industry post-COVID-197 [Online] Available from: https://www.nortonrosefulbright.com/en/knowledge/publications/6166757/south africa il prices. drop-what-will-fuel-the-enero-industry-post-covid 19 (Accessed: 2020-09-20). Question 1 (20 marks) Use the extract above to write an essay in which you discuss the following: The name of the shock mentioned in the extract (2) The effect of the decline in oil prices on economic growth in South Africa
Expert Solution
1) Exogenous shock mentioned in the above extract. The Russia–Saudi Arabia oil price war of 2020 is an economic war triggered in March 2020 by Saudi Arabia.It advocates to reduce oil production to curb the oil prices. This economic conflict leads to deplete in oil prices.
2) The effect of decline in oil prices on economic growth in South Africa would be greater due to certain reason. The very big reason is South Africa is the oil producing country . For Revenue generation and functioning of economy, it depend upon higher oil prices. Oil Revenue will drop which will have severe and ripple effect on the economy. Lack of storage facilities because of over-capacity fuel tanks.
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