Extractive Commodity Price Risks and Effects given the Covid-19 Pandemic

Sudden outbreak of the Coronavirus Disease (COVID-19) in December 2019 has brought global and domestic disturbances in the commodity market systems and processes. This has mostly affected the demand as well as the supply of the extractive sector commodities. The oil and gas markets have been severely complicated due to outrageous collapse in the demand majorly due to global travel restrictions which has also caused sharp down-swings and slows up-swings in global and national oil prices. The prices of both precious and industrial metals have also been negatively affected, although the price movement has not been more dramatic than that of oil prices. The ultimate short, medium and long term effects of the COVID-19 pandemic will greatly depend on global and national systems, technological developments, resources, infrastructure capacities and duration of its outspread, but it is expected to have long-lasting implications. The paper assesses levels of risks for the prices of extractive products given COVID-19 pandemic using the HakiRasilimali field research survey 2020.

The levels of risks on many commodity market prices in the extractive sector are high. There are various global and domestic factors contributing to current price volatility, mechanisms and effects on socio-economic factors given Covid-19. The global factor dominated by the plummeting of oil and gas prices was a direct consequence of an oversupply of fuel and a declining demand for fuel amidst travel restrictions and economic lockdowns. Lower and increased risk oil prices mean less investments, exploration; drilling and process activities because most of the new oil driving the economic activities are unconventional and have higher costs per barrel than the conventional source of oil. The levels of risks on the price of many mineral commodity prices have been highly affected by the Covid-19 pandemic. The internal firm factors include weak corporate financial strength and poor price-risk management strategies, as well as dynamic technological mining practices and methods at the operation levels.

All socio-economic entities have to support functioning of perfect competitive extractive product and pricing systems during and after the Covid-19 pandemic. All global, regional and nation oil extractive sector organisations, alliances and firms work jointly and cooperatively to ensure stable market supplies and demand given efficient technologies and prices.