Oil Prices Turn Negative Amid Declining Economic Activity

It’s been 100 years since the Spanish Flu ravaged the global community. Today it’s COVID-19, the worst flu pandemic since. In 1918, governments around the world consciously suppressed information to keep WWI soldiers from becoming fearful. In this, the information age, it’s a very different story. Rather than suppress information, governments, medical experts, and private industry representatives are rife with data on this dreaded disease. To make matters worse, some of the information we receive is contradictory, plus the political spin is alive and well. This leaves many unsure of what to believe. For example, how will we know when it’s time to reopen the economy? And, how safe is it to venture out in public? While there are many unanswered questions, here’s what we do know: shutting down large segments of the economy will have a dire effect on the lives of hundreds of millions. It’s ironic, but the remedy prescribed to fight the spread of COVID-19 may in fact, be worse than the virus itself. Many experts believe the economic hit will be especially harsh as GDP in the second quarter is expected to decline between 24% and 50%.

The Disappearance of Demand

The demand for goods and services has dropped sharply. According to one source, sales of general merchandise declined 26% for the week ending April 4. Moreover, U.S. restaurant transactions fell by 43% around the same period. Despite this, online sales grew by 16% compared to pre-crisis levels. Even though there are a few bright spots, the net effect is still economic disaster. Here’s an excerpt from a Forbes.com article I wrote on COVID-19, February 24, 2020:

A prolonged scenario would hurt many industries including travel and tourism, the food industry, the entertainment industry, and basically any business where large groups of people gather. With fewer people venturing out, traditional retailers (i.e. brick & mortar) would continue to suffer, leading to a spike in online sales as more people choose to have it delivered. Why venture out if you don’t have to?

At the time, I imagined an old west ghost town, complete with tumble weeds meandering down main street. I realize that is a hyperbole, but I am shocked over how much life has changed for so many.

Oil Prices Plummet: Here’s Why

One of the hardest hit industries is the energy sector. The lack of travel has pushed the price of oil to an all-time low. Yesterday, the price of WTI crude fell into negative territory, temporarily reaching negative $40. This implies that the seller of oil would have to pay the buyer to take possession of the commodity. Is this true? Not exactly. At least, not yet.

Find The Source Here.

Vinkmag ad

InvestorTalks

Read Previous

Today’s Oil Price Drop Is Bigger Than Yesterday’s Negative Values

Read Next

Pandemic Is A Worsening Threat To The Rental Housing Market

Leave a Reply