4/29/2020 6:10:00 AM Oil Prices Forecast Hard Times Ahead
Wayne Howard Staff Writer
Not that many of our readers really care about my opinion, but what I am about to write is much more than that. It is based on facts--some of them current, some historical.
First, the good news: the good news is that the steps that have been taken to slow the spread of the COVID-19 pandemic are working. There are, of course, those who doubt that statement--some still maintain the earth is flat.
Some will maintain that Sweden, which took very few measures compared to most other countries, was right. The Swedes boast that by later this year, they'll have achieved what is called 'herd immunity'--of the people who have survived the pandemic, many will have acquired the virus and didn't die and as such will have some immunity thanks to antibodies developed because of their infection.
It is true that one reason some survived the 1918 flu pandemic was likely that they had acquired antibodies having been exposed to a similar flu in the late 1880s. That 'herd immunity' may have helped to prevent other epidemics in the 20th Century. The next great outbreak of H1N1 flu wasn't until 2008-2009 when most of those who had lived through the 1918 pandemic were already dead and gone.
The one significant question about the Swedish decision may well be, "at what cost?" Allowing the spread of the disease may in the long run create an immunity among much of the population, but that's of little importance to those who lost family members because of it. It's reminiscent of how some mothers during my childhood actually visited relatives whose children had chicken pox to 'get it over with.' The result was that their children got that relatively mild disease and got over it. What they didn't know at the time is that having had chicken pox, they became subject to having shingles years later. My own mother didn't visit her mother for several weeks because at the time my cousin, whose family lived with my grandmother, had chicken pox.
Had the restrictions imposed in North Carolina not been put in place, we may or may not have had a much larger number of cases. Based on solid epidemiological evidence involving other diseases, it's reasonable to say we would have.
There is little doubt that in 'hot spots' like New York City, failure to impose restrictions would almost certainly have been disastrous. The restrictions there likely prevented hospitals becoming totally overwhelmed and having to make the kind of choices that were made in Italy, where some patients who needed one didn't get a ventilator because there weren't enough to go around.
Some have called me a 'yellow journalist.' Many have criticized the news media for reporting on the pandemic. Sorry, but ignorance is not bliss! We have endeavored to report the truth--sometimes not a pleasant truth.
There are those who want the restrictions on businesses removed immediately, some who choose to ignore and don't believe necessary the social distancing and wearing of masks. Lincoln & Gaston County commissioners have asked Governor Cooper to turn controls over to the counties.
Lincoln County has been quite fortunate--in part because most have followed the stay-at-home order and other recommened steps, in part because even though the eastern part of the county is urban, most of our county is rural; we don't use public transportation, and we don't live in quite the same proximity as those in Charlotte. As of Monday (April 27th), Lincoln County had only had 26 confirmed positive test results for COVID-19. Of those, 18 had since recovered. We have had no death, and none of those 26 who had a positive test has needed to be hospitalized.
While some new cases are being reported each week, the number of new cases in Gaston, Catawba and Cleveland counties has slowed to only 1-3 new cases daily.
A group calling itself ReOpen Lincoln County will hold a gathering downtown this Saturday (11 AM-1 PM). Some insist it is not a protest, but it obviously is--a protest against Gov. Cooper's continuation of restrictions. The Facebook post says social distancing will be maintained. That was not the case in Raleigh on Tuesday where a large group gathered outside the capitol for much the same purpose: to insist that Cooper end the restrictions he has imposed.
In this case, it's only my opinion--but I fully expect that Cooper will implement phase one of his three-step plan to end the restrictions when the current extension ends on May 8th. I think the political pressures are going to be too great for him not to take that action. At the same time, I expect that the number of cases (and deaths) in North Carolina will continue to increase. Over 300 people have now died, and yes, despite what some question about the cause, medical examiners confirm that COVID-19 was involved in those deaths. Over nine thousand have tested positive for the virus in our state; before it's over, I fully expect the number to top 10,000.
Those who read my earlier editorial "This Too Shall Pass" know that I do not expect COVID-19 to forever change our way of life, but short-term, it will certainly do just that; and there is no doubt that it has already had and will continue to have a massive negative effect on the economy.
So that was the good news? Yes, because from this point on, it gets much worse.
I have been saying for nearly three years that a big downturn in the economy (not just ours but the world economy) was coming in Spring-Summer 2020. I had not expected it to have its full effect until early 2021, but COVID-19 speeded things up and exacerbated the calamity.
I have also said that this had nothing to do with President Trump and his policies, although I believed then and still maintain that the 2017 tax cut was a mistake.
The closure of businesses due to the pandemic will mean that some will never return. Restaurants have lost 80% of their business by some estimates; many won't be able to reopen and even if they do, fear of the virus may keep many from visiting them. The proposed reduction in seating to allow 'social distancing' will also pose a problem that may be insurmountable.
Even major department stores may not survive. Nordstrom has filed for bankruptcy; Macy's is in serious trouble; and others including regional chains may close.
Small businesses may not survive even if they manage to get one of those PPP loans. That may keep them going for awhile, but I fully expect the coming depression--and yes, it will be a depression--to last much longer.
Some have been rejoicing over the recent low gas prices; the biggest complaint may have been that now that we can afford the gas, we have nowhere to go. Most are unaware just how important the oil industry is to the US economy.
Arthur E. Berman is a petroleum geologist with 36 years of oil and gas industry experience. He penned a column this week entitled "The Death of US Oil." In it he notes that American oil consumption has declined 30% since January.
He writes: "Most people, policy makers and economists are energy blind and cannot, therefore, fully grasp the gravity or the consequences of what is happening.
"Energy is the economy and oil is the most important and productive portion of energy. US oil consumption is at its lowest level since 1971 when production was only about 78% of what it was in 2019. As goes oil, so goes the economy…down."
Admittedly, as an oil anyalyst, his perspective is slanted; but in my opinion, accurate.
I've followed oil prices since the 1990s and a few months back, one analyst whose opinion I respect, predicted that rising oil prices could erase America's national debt. $80 a barrel oil would certainly help that situation. Instead, the price is now about $20 a barrel--less for US crude.
Smaller producers, already with serious debt, will have no choice but to quit. The loss of their production will remove the US from the position we had recently acquired as the world's #1 producer.
To his credit, President Trump did manage to negotiate an agreement in which both the Saudis and the Russians agreed to cut their production. Unfortunately, the cuts were too little, too late.
In effort to save the economy, Congress passed several spending measures. You may have received a $1200 check (or larger depending on dependents). $600 was added on to unemployment payouts for a short time. The problem is that the economy isn't going to recover quickly; this situation is going to get worse and last well into next year and perhaps beyond. There is already talk about another 'stimulus' check. We can't keep writing checks for money we (the US) don't have...the national debt has swelled by another three trillion dollars. The problem with the $1200 is that it will be spent--much like tax refund checks usually are--for items that might not have been purchased without it. Some will have that big-screen tv or new car, but they won't be able to pay their mortgage. The 'stimulus' checks and the extra unemployment money are short-term "solutions" to what is going to become a long-term problem.
One thing I do applaud is the PPP (Payroll Protection Plan) program. Mismanaged as it has been, its intent was good--to help small businesses stay afloat and maintain their employees during the crisis. Of course, much of the money was channeled through big banks who favored their customers--big businesses who could qualify under the way the law was written--and ignored or denied the requests from many of the smaller businesses the money was meant to help.
Can we endure? Yes, and as I said in that other editorial, I don't expect that our lifestyles will be affected quite the way some do. I don't think we'll be wearing masks and avoiding social contact a year or two down the road.
Business, on the other hand, will change. Already--before COVID-19 and before the economic downturn--things had changed. More people were doing business online. Smaller stores were having to create or develop their particular niche.
One good thing that is likely to occur is new growth in American manufacturing. The pandemic has certainly taught us the importance of being able to produce products here instead of buying them from other countries.
I also fully expect that we will at last see a big program next year to improve our infrastructure. Many of our bridges are in serious need of replacement; we've delayed road projects that should have been completed. The stay-at-home orders and the school closures and related 'remote learning' have pointed up the need to improve our internet access. As a way to put some of the 20-25% unemployed that we'll have, such public works projects will become a reality.
We may also finally see reasonable immigration reform. Those who didn't know it are now faced with the truth that many of those who put food on their tables are farm workers who are undocumented, coming to the US from other countries.
My parents survived the Great Depression of the 1930s. I am old and may not live to see the end of the calamity that we're facing now; but I believe that America will survive it--and hopefully learn from it so that our future will be even better than our past.
The Great Depression gave us many public works projects that have been enjoyed for decades since. The CCC and the WPA provided jobs and the money sent home fed families who might otherwise have starved. They also helped prepare America for World War II.
It also gave us Social Security and the 40-hour work week and the minimum wage law. I believe the coming calamity will at last give us universal health care.
This opinion piece was written from my perspective. It is likely that different people looking at the same information may form a different opinion. As a reporter (and occasional editorial writer) I have never claimed be totally objective. I believe those who do are lying to their readers and to themselves. I've lived over 70 years and I've learned some things.
One thing that this crisis my do is create a renewed interest in our government and its workings on the part of many who didn't get involved before. I don't like that many think of the government as an enemy of the people (some say the same about the news media). I believe in a government 'of the people, by the people and for the people.' WE are (or at least should be) the government. Learn about the candidates and VOTE. You may vote one way and I another, but we both need to vote.
Will Rogers said, "It's almost worth the Great Depression to learn how little our big men know." Democracy isn't meant to be a tool by which a view control the many--but a tool by which the many control the actions of a few that affect all. To make it through what's ahead, we'll need to exercise that power.
A 2018 survey of almost 3,500 US adults found that 64% at least sometimes get news from a news website or app, and 64% said they watch local TV news. Almost half (47%) of adults get news at least sometimes from a social media site. That exceeds the 41% who read newspapers in print. TV and print actually lost ground from a similar survey conducted in 2016, while digital made advances in preference since then.
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