The coronavirus pandemic, declining global consumption and overproduction have combined to deal a severe blow to the oil industry.

The U.S. Energy Information Administration has lowered its forecast for domestic oil production this year to an average of 11.7 million barrels a day, down 500,000 barrels a day from 2019. The reason? Less need for it. The agency’s Short-Term Energy Outlook forecasts year-over-year drops of 64% in jet fuel consumption, 26% in gasoline, and 17% in petroleum distillates.

In response to falling demand, U.S. crude oil production plunged from a record 12.9 million barrels per day in November, 2019 to 11.4 million barrels per day in May of this year. Baker Hughes reported the fewest active drilling wells in the U.S. since it began keeping records in 1987.

For all of 2020, EIA expects U.S. crude oil production to drop by 0.7 million barrels per day, the first annual decline since 2016.

The culprit, of course, is the sagging domestic and global economy caused by lockdowns, business interruptions and cratering consumer demand in the wake of the pandemic. “Reduced economic activity related to the COVID-19 pandemic has caused changes in energy supply and demand patterns in 2020, particularly for petroleum and other liquid fuels,” EIA said. “Uncertainties persist across EIA’s outlook for other energy sources, including natural gas, electricity, coal, and renewables.”

The glut of supply has caused oil prices to remain low, hovering in the $30 per barrel range for months (although recently flirting with $40). But that’s not solely a function of the lousy economy. While the impact of the pandemic is undeniable, the U.S. domestic oil industry bears at least some responsibility for its plight. Shale oil extraction allowed producers to essentially flood the market with supply, keeping prices down. Meanwhile, global production by members of OPEC, Russia and 22 other oil-producing countries that make up what’s been dubbed OPEC Plus continued apace.

In April, in a bid to restore pricing and stability to global markets, OPEC Plus countries agreed to slash combined production by 9.7 million barrels a day — nearly 10% of global output — in May and June. In early June, they announced an extension of those cuts through July, and there’s been talk that they might be maintained through the end of this year. Countries that aren’t members of OPEC Plus, including the U.S., Canada, Brazil and Norway, have also been making cuts in production.

Against this backdrop of reduced supply, demand is creeping back. China is back to around 80% of levels from before the pandemic, while demand for natural gas in the U.S. is now at 85% of its prior amount, according to Dan Eberhart, chief executive officer of Canary LLC, an oil field services company.

Eberhart predicts that it will take months for the current supply glut to clear. “I think we’ll be looking for an oil rally toward the end of the year,” he says. Others fear the global recession could last through 2021 and even beyond.

Agreements between competing oil-producing nations are never set in stone; any major member of OPEC Plus (or, for that matter, the U.S) can defect at any time. Eberhart is confident that won’t happen in the short term, because of a lack of storage capacity. What’s more, the demand for more oil simply isn’t there.

As time goes on, however, “the incentive to cheat goes up,” Eberhart says. He expects Russia — which tussled with Saudi Arabia in the months prior to their agreement to cut production — to be the first to do so.

Still, a good portion of the blame for the U.S. oil industry’s continuing woes can be found closer to home. Domestic shale production, which has rocketed the nation to the position of world’s leading crude oil producer, has disrupted the global oil market to the tune of between 5 million and 8 million barrels a day. That’s something “the world didn’t see coming 10 years ago,” Eberhart says.

One side effect of the U.S. oil boom has been to set back the progress of renewable energy sources, which were looking increasingly attractive when oil first hit $100 a barrel back in 2008. At the same time, automakers have been making internal combustion engines for cars and trucks increasingly fuel-efficient.

“We’ve become so efficient in harvesting hydrocarbons in the U.S. that we’ve destabilized the market and brought too much supply to the forefront, and pushed renewables further back,” Eberhart says.

All of which will slow the move to full electrification of automobiles, he believes. At the same time, don’t expect oil consumption to quickly return to previous sales levels, even when the pandemic subsides. Demand for gasoline could remain sluggish as private car ownership becomes less attractive to the general public.

When the dust settles, Eberhart believes, oil-producing nations will come to see that they collectively overcut output. They’ll begin spending money to restart operations, leading to a “mini-boom” in the fall.

Nevertheless, uncertainty will continue to cloud the picture for the oil industry and those companies that depend on it. As for Canary itself, “we’ve had to do a lot of belt-tightening,” says Eberhart. “Anyone in this business knows that you have great, good and horrible years. But this has been more severe and quicker than ever our worst-case scenario would have predicted. We’ve had to do lots of layoffs, but we’re still there, and still prepared for the long term.”