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Q&A with Schar's Richard Kauzlarich: Energy Markets and COVID-19

March 23, 2020   /   by Dixie Downing

Former ambassador Richard Kauzlarich specializes in international peace operations, energy markets, and climate change. Before joining the Schar School of Policy and Government faculty as a Distinguished Visiting Professor and the co-director of the Center for Energy Science and Policy, Kauzlarich served as the ambassador to Azerbaijan and Bosnia and Herzegovina. From 2003 to 2011, he served as the National Intelligence Officer for Europe on the National Intelligence Council, Office of the Director of National Intelligence (ODNI).

environmental portrait of Richard Kauzlarich

Richard Kauzlarich

How will the COVID-19 crisis affect climate change action?

Globally, we are facing the perfect storm of coronavirus and the response to it—pandemic-induced economic downturn—and the Saudi-Russian oil price war. These are interrelated phenomena that have the potential to divert attention and resources from dealing with the climate change issue.

Why did the Saudis ramp up oil production?

Saudi Arabia, as the leading oil producer in OPEC, sought agreement to limit production beyond the existing OPEC Plus agreement, including Russia. That effort failed and essentially Saudi Arabia declared an oil war against Russia by massively increasing oil output. A consequence of this is the damage done in U.S. financial markets that are now unwilling to fund the run-up in U.S. shale oil and gas production.

What does the Saudi-Russian oil price war mean for U.S. energy markets?

The U.S. energy sector—important to the U.S. economy and a source of significant employment in states like Texas, Pennsylvania, and Ohio, which is also important for the outcome of the 2020 elections—is being battered. The coronavirus is part of a complex set of disruptive events that are feeding on each other with no clear policy response at the national or international level.

What does the future of energy markets and COVID-19 look like?

There is no straight-line analysis that can explain how this will end. Energy markets were oversupplied in the face of slowing global economic demand, affecting the Chinese energy market in particular. The coronavirus first further slowed first the Chinese [economy] and now the global economy.