OPINION: Economic nationalism initially seemed an attractive way for some political leaders to tackle growing public concern about the pitfalls of globalisation.

But the dangers of individual nations acting purely in their own self-interest are currently being highlighted.

A global pandemic such as the Covid-19 coronavirus is tackled better on a global scale, with nations learning from, and co-operating with, each other.

The Saudi Arabia and Russia energy price war in the midst of this health emergency risks turning chaos into crisis.

Dangerous moves: Upstream's cartoon of 13 March, 2020 looked at the sudden launch of an oil price war between Saudi Arabia and Russia, which continues to rage Photo: RYTIS DAUKANTAS/UPSTREAM

It is inevitable that two petro-economies slugging it out for market share with cheap prices will seriously damage their own economies.

Another early victim is the US shale industry, which is already demanding financial help from President Donald Trump to prevent company closures and staff layoffs.

Yet, it was Trump who promoted the 'America First' doctrine and encouraged shale drillers to expand production even as global demand grew only tepidly.

This was one reason why Russia started the price war, concluding that its Opec+ strategy of co-operating with Riyadh in output restraint was doing little other than boosting hydraulic fracturing in the US.

Oil price slump

The price war has sent oil prices tumbling, with West Texas Intermediate falling below $30 per barrel, even as Trump boosted demand by promising to fill the country’s strategic oil reserve “to the top".

Low oil prices have led to surging tanker rates and should help consumers in oil-dependent economies and motorists, but the shock move has upset capital markets at a time when they fear Covid-19 could trigger a global recession.

Even with the US Federal Reserve cutting interest rates at the weekend for the second time in a month, stock markets remain in panic mode.

Capital spending is being cut at almost all oil and gas companies.

Eventually, the oil glut will undermine the Saudi and Russian economies and, to a much lesser extent, that of the US. It will, however, devastate the fragile, hydrocarbon-dependent economies of Opec countries such as Venezuela, Nigeria and Angola.

Low oil prices will certainly damage the balance sheets of the oil supermajors at a time when they are already badly out of favour with investors.

Capital spending is being cut at almost all oil and gas companies, including the newly floated Saudi Aramco.

Coronavirus, meanwhile, is forcing the services sector into cuts.

In Norway, Aker Solutions warned staff they could be laid off, Kvaerner has sent home over 1200 foreign contract staff from two fabrication yards, while Equinor has reduced capacity on at least one of the North Sea platforms amid a virus scare.

A combination of Covid-19 and an oil price war is a nightmare for supermajors already under attack for not doing enough to tackle carbon emissions, though these market conditions make renewable power technologies look more expensive.

But huge volatility in commodity values, and any requests for financial help from governments by the oil sector, will aggravate public disquiet around oil groups.

It is only weeks since Chevron was promising $80 billion of dividend handouts to shareholders. Now other oil businesses are asking for aid — which is bad optics, as they say in political circles.

Of course, it was politicians, not petroleum executives, who started the oil price war and promoted economic nationalism. Mixed together, these have proved a combustible cocktail.

(This is an Upstream opinion article.)