Oil exporting countries will have a negative impact with the decrease in oil prices while oil importing countries will benefit from it. What about oil producing companies?

1 Answer 1


Oil-producing companies will see their revenues & profits drop or simply post losses. Most oil-producing companies (engaged in the production of crude oil only) will not be able to recover their capital and/or operating costs. This means that some of them will also go bankrupt as they exhaust their credit facilities.

Some integrated oil companies can benefit from a small drop in oil prices. These companies buy more oil than they produce (e.g. for their refineries). However, with the severe demand destruction triggered by Covid-19, refining margins have fallen dramatically and all oil companies have seen/ are likely to see a major hit on their earnings.

One exception to the above is those companies that have hedged their commodity exposure. Some companies hedge a part of their production (e.g to recover operating costs) and very few can afford to hedge at scale (this can be very expensive).

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