The outbreak of COVID-19 and thewide-ranging measures needed to slow its advance triggeredan unprecedented collapse in oil demand, a surge in oilinventories, and a record one-month decline in oil prices inMarch 2020. This paper examines the likely implications ofthe 2020 oil price plunge for emerging market and developingeconomies. It presents four main results. First, the recordplunge in oil prices was predominantly driven by demandfactors as wide-ranging measures to stem the pandemicprecipitated an unprecedented collapse in oil demand, butthe surge in oil inventories also exerted downward pressureon oil prices. Second, this latest oil price decline waspreceded by six previous plunges over the past half-century,during which energy exporters and importers suffered similarinitial output losses (about 0.5 percent) that were unwoundwithin three years. Third, the current episode of low oilprices holds limited promise to boost the global economyamid widespread restrictions and narrow room for fiscalsupport in energy-exporting emerging market and developingeconomies. Fourth, many emerging market and developingeconomies entered the current public health crisis withprecarious fiscal positions; current low oil prices are thusan opportunity to review energy-pricing policies, includingremaining energy subsidies, to mobilize domestic resources.
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