“There are decades where nothing happens; and there are weeks where decades happen.”
― Vladimir Ilyich Lenin
Man o’ man, this is gonna be one helluva week.
It all came to a boil Monday morning as the New York Stock Exchange went into free fall. Investors grappled with Saudi Arabia’s price cut, rising corona virus infections and the realization China wasn’t going to be able to prime the world pump.
First, the oil price war. Saudi Arabia cut its prices after it failed to persuade Russia to curtail its production, launching a price war and seeing oil futures trading at $30 per barrel.
This is going to hurt oil producing nations such as Canada and the United States. The Saudis can pump oil out of the ground for a few dollars a barrel, while the rest of the world needs considerably more. The Russians say they can live with $25 per barrel oil for years. Canada and the US not so much.
Still, consumers will benefit. Gasoline and diesel prices will fall. We’ll likely enjoy the lowest prices in decades.
Ironically, the price drop will render the Trudeau government’s carbon tax utterly pointless. So there is some consolation in that.
Can our economies weather the downturn? Of course, we’ve dealt with $10 a barrel oil. We can deal with this.
What’s more difficult to deal with is the irrational fear that is gripping people. Investors are not immune from the wave of fear that is circling the globe over the spread of the corona virus that began in Wuhan, China.
As governments overreact to the spread of the virus, shutting down entire cities, the effect on production cannot be avoided. It started in China and it has spread to other countries. The shutdown in China disrupted supply chains. That has had a ripple effect.
The irony, of course, is that the 2009 flu outbreak was far worse, infecting far more people and killing far more people as well and yet we managed to continue working.
But once fear grips people, it’s hard to inject a dose of common sense.
That is what we’re dealing with – fear. After years and years of people preaching climate doom, economic doom, one stupid virus is bringing down the global economy.
We’ll survive all this and we will come out of it stronger, more resilient and, it is hoped, inoculated against the fear mongers. Our economies, after all, are far stronger that China’s. But it will require cool heads.