The media loves a headline hyperbole, so the news that one of the main price indices for oil went negative was brilliant. For years, we have all been brought up with oil being expensive and a fundamental cost and driver or drag on our economy. So, to suddenly hear that the West Texas Index price for a particular contract was negative, came with apparent astonishment, judging by the headlines. In fact, this is something that has been nattered about for some time, as supply increased and demand fell. Meanwhile back in the La-La Land of the oil producers, the old oil cartel of OPEC was meeting up with what they were calling OPEC Plus, which is basically the old lags plus Russia, Mexico, Norway and occasionally Canada.
This meeting was to bicker over further production cuts. Global demand has fallen by over 35%, but countries are still pumping. This was like watching the bath overflow without realising the plug was blocked and no one was turning off the taps. However, in this instance, that damage will be a lot more than a sodden carpet.
OPEC has not been a very reliable cartel for a lot of its history, as members agree one thing and often do another for their own benefit. Then, add in non-members like Russia (and remember Putin set his medium-term Budget at over $100 per barrel – nice one Vlad), Canada and Norway and there is a lot sloshing around. For Canada, the expensive Tar Sands mean that they will be running at a loss, as will for the moment the world’s largest producer, the USA, due to it going fracking mad. So now, many are rushing around trying to solve short term issues such as storage as well as supply. Now that is obviously bad news for all producing countries, especially those who are economically dependent upon it.
However, before we all smirk, what is bad for them will also be bad for us. Despite only paying 57.95p duty per litre plus another 20% of VAT, our pump prices surely will drop too. Apart from that, we aren’t supposed to be driving anyway!
The Important effect – No, the important issue and effect here is the price as an indicator of the future of the global economy. The oil price can be the canary in the coal mine indicator of potential danger. Now quite possibly this is a rather sticky smelly old canary with oily wings, but still to be watched. The fall in crude prices in 2007 were giving us a clear warning of issues ahead the following year – and didn’t we feel that?
This price drop just backs up what many are fearing, not just a global slowdown, but a global fear of recovery after the lockdown. This may well mean that we will be dealing with not an economic recovery but economic resuscitation. One which no one country can solve the issue alone, but rather through close clear international co-operation and planning. Thus, with the blame game being played out by a narcissistic, deluded and economically ignorant US President, this cannot fill us with much encouragement.
So please, leaving aside the deluded for the moment, the risks are higher enough for the most intelligent and sentient leaders in key economies to realise that we need to work together and rescue the global economic body before it suffers the full effects of an economic cardiac arrest.
I have previously discussed the actions I believe should be being planned for in the immediate by the UK government, and with obvious differences, this should be the same attitude towards post lockdown policies adopted by all of the other leading nations and supra national bodies like the EU.
The commodity producers will be suffering in the slowdown, the manufacturers will be the same, and thus it comes down to the primary driver of the world economy – the global consumer. It is the confidence of the global consumer and especially the US consumer being Mr & Mrs Joe Shmoe living in Little Rock, Arkansas and shopping in Walmart, who until last month had a job! They account for over 65% of the US economy.
Yes, we will need a form of New Deal but on an international scale and delivered by a credible leader! In fact, the New Deal with all its fanfare did not fulfil all its expectations of infrastructure spending, but its enthusiasm and confidence building were vital. Actually, the great expenditure came from something else which none of us wish to repeat – namely WW2.
So, we must nurse our sticky yellow bird back to health, but that is going to take more than a few tax breaks and another plane load of safety garments to resolve. Brave actions needed for a brave little bird.
And finally, the plot about a plot. If no one has been in contact during the lockdown, please don’t feel that you are necessarily being shunned by your friends and family. For one man it turned out that they all thought he was dead. Alan Hattel said he was worried by the fact nobody had phoned him in three or four months and didn’t know why. However now he believes people think he died. Why? Because someone has set up a gravestone with his name on it.
Alan, 75, a retired welder from Forfar, Tayside, said: “I’ve been confused by it all but now I know why nobody has been calling. I don’t even want to be buried,I plan to be cremated.” The headstone was erected at Newmonthill Cemetery.
He has spoken to Council officials who plan to put a cover over the headstone which bears his name. Mr Hattel, claimed his ex-wife had bought the plot of land and probably put up the headstone with the intention of them being buried together. Both their names appear on the headstone. “I’ve never, ever said I wanted to be buried alongside my ex-wife.” said Mr Hattel, who has two grown-up children with his former spouse. “We’ve been separated 26 years and there’s no animosity.”.
No animosity apart from the possibility that she would prefer you buried.
Image source: inpoultry.com (2020)