"On balance, it is better to have lower, than higher, oil prices."
"On balance, it is better to have lower, than higher, oil prices."
The coronavirus rages. Over the weekend, the number of victims exceeded 100,000 for the first time and the number of countries hit reached 110. The virus causes the disease called COVID-19—coronavirus infectious disease 2019. At this writing, COVID has infected 113,000 and killed 4,012.
Italy became the first country in the world to impose a nationwide lockdown, a measure China had previously tried only by province, in Hubei, the origin of the coronavirus. The lockdown effectively restricted the movement of 60 million in Italy where COVID-19 had infected 9,172 people and killed 463—the worst in Europe.
In the Philippines, COVID-19 has infected 35, with 28 pending test results. President Duterte stopped classes in the national capital for four days till March 15, to slow/stop the spread of coronavirus.
On Monday, March 9, for the first time, the World Health Organization used “pandemic” to describe the situation. “Now that the virus has a foothold in so many countries, the threat of a pandemic has become very real,” declared Edros Adhanom, the WHO director general. “But it would be the first pandemic in history that could be controlled,” he assured.
The global health crisis has turned into a global economic crisis, raising the specter of recession in Asia, Europe, and the United States, the Philippines’ major export markets and sources of investments. For the first time in 11 years, talk of US recession is no longer speculation.
On Monday, March 9, New York’s Dow Jones stocks lost 7.8 percent of their value. The S&P 500 crashed nearly 8 percent—its worst drop in ten years, decimating more than $5 trillion of listed wealth. With the S&P already losing 19 percent from its high point last week, stocks near bear territory for the first time in 11 years. The share price crashes amounted to a global carnage, the worst since 2008.
“The Dow Jones Industrial Average sank by 7.8 percent or more than 2,000 points—the biggest points-drop in history and the largest decline in percentage terms since the financial crisis. The S&P 500 fell 7.6 percent, while the Nasdaq dropped about 7.3 percent. The declines in London wiped some £125bn off the value of major UK firms,” according to BBC.
On Monday, Philippine stocks lost more than 6 percent of their value. Listed shares have already lost 19 percent of their value since 2019’s last trading day.
The same day, oil prices fell more than 20 percent—the sharpest fall since the January 1991 Gulf War as Saudi Arabia launched a price war against Russia. The price war threatens to push oil to $20 per barrel. That would be a drop of 67 percent from the December 2019 average of $61.30 a barrel.
As of March 9, 2020, the benchmark West Texas Intermediate crude is $33.18 per barrel, down 45 percent from December’s $61.30. In June 2008, crude hovered at $145 a barrel.
A sharp oil price drop should cheer up our more than 500,000 jeepney drivers, our two million fishermen, and our three million farmers who use diesel for their work, and of course, our ten million motorists. It also means much lower cost of electricity for most Filipino households and industries, thereby bringing down the cost of goods and services. Fuel easily accounts for 20 percent of a household’s expenses. The same ratio applies to industries.
However, sharply lower crude prices would be bad news for our 2.2 million OFWs who are working in oil exporting countries Saudi Arabia (No. 1), UAE (No. 5), Kuwait (No. 6), and Qatar (No. 9). The four account for $5.2 billion in remittances or 17 percent of the $30 billion total remittances to the Philippines.
On balance, it is better to have lower, than higher, oil prices.
Meanwhile, “with decisive, early action, we can slow down the virus and prevent infections. Among those who are infected, most will recover,” WHO chief Tadros said on March 9. ‘Of the 80,000 reported cases in China, more than 70 percent have recovered and been discharged.”
WHO classifies infection into four categories—no cases, sporadic cases, clusters, and community transmission. For the first three categories, countries must focus on finding, testing, treating and isolating individual cases, and following their contacts.
According to Tadros, In areas with community spread, testing every suspected case and tracing their contacts becomes more challenging. Action must be taken to prevent transmission at the community level to reduce the epidemic to manageable clusters.
Depending on their context, countries with community transmission could consider closing schools, cancelling mass gatherings and other measures to reduce exposure.
The fundamental elements of the response are the same for all countries:
• Emergency response mechanisms;
• Risk communications and public engagement;
• Case finding and contact tracing;
• Public health measures such as hand hygiene, respiratory etiquette and social distancing;
• Laboratory testing;
• Treating patients and hospital readiness;
• Infection prevention and control;
• And an all-of-society, all-of-government approach.
According to Johns Hopkins CSSE, the first reported COVID-19 infected individuals, some of whom showed symptoms as early as Dec. 8, were discovered to be among stallholders from the Wuhan South China Seafood Market. Subsequently, the wet market was closed on Jan 1. The virus causing the outbreak was quickly determined to be a novel coronavirus.
On Dec. 31, 2019, WHO was informed of an outbreak of “pneumonia of unknown cause” detected in Wuhan City, Hubei Province, China—the seventh-largest city in China with 11 million residents.
By Jan. 23, there were over 800 cases of 2019-nCoV confirmed globally, including cases in at least 20 regions in China and nine countries/territories.
On Jan. 10, gene sequencing further determined it to be the new Wuhan coronavirus, namely 2019-nCoV, a betacoronavirus, related to the Middle Eastern Respiratory Syndrome virus and the Severe Acute Respiratory Syndrome virus.
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