Drop in oil prices, COVID-19; a double whammy to US economy

10 Mar 2020

Drop in oil prices, COVID-19; a double whammy to US economy

Drop in oil prices, COVID-19; a double whammy to US economyAs new cases of COVID-19 begin to emerge and grow rapidly across the globe, its effect is showing on the business side of things. What's more, in the US, there has been a sudden drop in oil (petrol, diesel etc.) prices as well. Its a double whammy to the US economy.

Effects of COVID-19

The number of Americans who have tested positive for COVID-19 is rapidly rising.
 	Any travel or large-scale gatherings are being cancelled.
 	This is leading to substantial fall in airline travel, major event spending, and even lunch customers near large office complexes.
 	Mass quarantines, like the one happening in Italy, have a massive impact on business growth and activities.

Oil Shock

The US is one of the world's largest producers and exporters of petroleum.
 	Last week, the oil producing countries tried to limit the underground extraction of oil in the face of falling demand. But Russia refused to comply.
 	As a result, Saudi Arabia announced over the weekend that they would increase production and try to undercut other producers.
 	It has led to a sudden surge in expected supply, while the demand is falling. This, in turn has led to a huge drop in oil prices.
 	This makes virtually all new US oil drilling uneconomic for the time being. This will affect workers and their incomes.

The US economy is likely to enter recession* some time in the second quarter due to all the above.

*Recession: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

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As new cases of COVID-19 begin to emerge and grow rapidly across the globe, its effect is showing on the business side of things. What’s […]

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