Economic implications of a SARS/Coronavirus outbreak

[Smurf1976]

It would be most unfortunate to vaccinate everyone, remove lockdowns and other restrictions, then find you can't go anywhere anyway because you can't get petrol.

For the UK that seems to be the latest thing in short supply. Not petrol as such, just the ability to actually get hold of some.

Fuel supply: UK suspends competition law to get petrol to forecourts

It comes as the Petrol Retailers Association warns that up to two-thirds of its members are out of fuel.

www.bbc.com

At least it's not toilet paper this time.

 

[wayneL]

It would be most unfortunate to vaccinate everyone, remove lockdowns and other restrictions, then find you can't go anywhere anyway because you can't get petrol.

For the UK that seems to be the latest thing in short supply. Not petrol as such, just the ability to actually get hold of some.

Fuel supply: UK suspends competition law to get petrol to forecourts

It comes as the Petrol Retailers Association warns that up to two-thirds of its members are out of fuel.

www.bbc.com

At least it's not toilet paper this time.

I think I would prefer to be able to stock up on a 44 gallon drum of diesel, than trolley full of bog roll.

Shredded newspaper might be a bit undignified to wipe your @ss with, but supply of a fuel is a matter of survival for many. Our country only has 20 days supply of oil in reserve and even a minor supply chain disruption could see us in deep doo doo

I'm a bit alarmed to be frank and I'm actually going Mormon (a years supply of food, bog roll, and *Guinness)... And growing our own veggies etc.

And if worse comes to worse.... Horse meat jerky lmao.

I've always joked about having a Kalashnikov and 10000 rounds of ammo buried in the back garden but I actually wish that I had done that.

 

[wabullfrog]

US 10 year getting close to 1.5%. Highest it;s been for a couple of months, short term blip or something more?

 

[over9k]

Bit of a virus snoozefest last week with evergrande and the evergrande stuff threw a wrench in the works with everything else going on but now that's in the rear vision mirror (mostly) we can get some clarity on the inflation swing play being back on the cards.

With the winter energy crisis that's hitting so energy & banks are screaming whilst tech is plunging.

I posted a while back how much back & forth there was last time this happened:

Alright here's your week:

View attachment 126998


And here's the kind of swing plays that have been available recently. Just three trades would have you at near 300% return:

Sell your banks position anywhere high up on the curve here:

View attachment 126999

Sell your tech holdings and dive back into the banks here:

View attachment 127000

And then flog your bank holdings where indicated above and rebuy into tech gets you here:

View attachment 127002

Reason?

Bond yields:

View attachment 127004


Someone earlier asked if growth's day was over, whether it could make a comeback etc etc.

Here's your answer:

View attachment 127005


And we still have tons of "better than expected" data to come pouring in:

View attachment 127006

And we're getting round two now, here's our first proper divergence in weeks:



So it's time to get busy. Swing plays abound.


In answer to your question, we're heading into winter so I think there's stacks of volatility/inflation fears/etc etc to be had yet. Because those who don't trust the vaccines generally work in the lower skilled jobs like truck driving, ship unloading, pipe fixing (plumbing) etc that actually provide/transport all of our needs like food, energy etc, this gives us supply problems, which drives prices (inflation) up. Combine that with winter being a much worse environment for virus spread and it's bad juju all round.

So, keep a very close eye on the supply side of this. Anything you can think of that will effect supply and thus prices (inflation). Things like truck drivers being convinced (or compelled) to get the vaccines, that sort of thing. This is a pure supply side phenomenon.

 

[Smurf1976]

Anything you can think of that will effect supply and thus prices (inflation).

Energy comes immediately to mind.

OK, perhaps some personal bias since it's my core area of knowledge but I make the comment with some basis. Among others:

UK natural gas prices have increased dramatically and already a number of retailers (companies that sell gas to consumers) have failed financially. Various estimates suggest that of ~70 retailers in existence a few weeks ago, around 60 are likely to fail by the time this is over so that's most of them going broke. When you're locked into retail contracts at a price below the (now greatly increased) wholesale gas price, anyone not fully hedged is bleeding cash big time and that's a lot of them.

European, as distinct from UK, gas prices in general are up sharply. US domestic natural gas and global LNG prices also up considerably.

China there's reports of major electrical load shedding (rolling blackouts) right now. Most notable comment on that one being:

The energy shortage at first affected manufacturers across the country, many of whom have had to curb or stop production

Above comment from https://www.bbc.com/news/world-asia-china-58704221

Also whilst the cause is logistics rather than any actual lack of supply as such, it's nonetheless a reality that a large number of petrol stations across the UK have now run dry. Regardless of the cause, if consumers and business can't get petrol and diesel well that stuffs things up hugely. That's largely a transport issue but of course that's not the only purpose petrol and diesel are used for, just the main one but not the only one.

Meanwhile I'll add a general comment that whilst it's not yet sufficient to be mainstream news, there's quite a few electrical grids and gas supply systems across the world that aren't in great shape right now. They're working, consumers are being supplied, but the margin of spare capacity is below the point that an engineer would be comfortable with. That being so, it's inevitable that more "incidents" will occur.

So energy price shocks and in some cases physical disruptions are an issue. Electricity, gas and in some cases liquid fuels too for varying reasons.

Global oil prices are gradually creeping up too.

 

[over9k]

Yes and energy is the most important one as it takes energy to produce/move literally anything - you can't harvest food without fuel in the tractors and then you can't transport it to the supermarkets without fuel in the trucks and so on & so forth.

Let's be clear here though, this inflationary crunch/energy spike has only come about very recently, energy spiked and then crashed in the middle of the year and was subsequently in the doldrums for quite a while:



The S&P is actually down on the day which shows you just how much everything else is getting absolutely smashed.


I've been wondering how long before the news starts uttering "transitory" every other sentence like they were 6 months ago.

 

[over9k]

I think I would prefer to be able to stock up on a 44 gallon drum of diesel, than trolley full of bog roll.

Shredded newspaper might be a bit undignified to wipe your @ss with, but supply of a fuel is a matter of survival for many. Our country only has 20 days supply of oil in reserve and even a minor supply chain disruption could see us in deep doo doo

I'm a bit alarmed to be frank and I'm actually going Mormon (a years supply of food, bog roll, and *Guinness)... And growing our own veggies etc.

And if worse comes to worse.... Horse meat jerky lmao.

I've always joked about having a Kalashnikov and 10000 rounds of ammo buried in the back garden but I actually wish that I had done that.

Australia actually uses America's strategic petroleum reserve, see here:

The Government has splashed the cash for oil but how much have we bought?

The Energy Minister says the Australian taxpayer has got a great deal, and the country's oil reserves have been boosted, but just how much oil is now in storage is unclear.

www.abc.net.au

It does actually cost to store oil in tanks etc. The yanks store the big amounts underground in old salt deposits.

It's actually really cool how they do it:

The salt caverns are created by drilling wells into massive salt domes and injecting them with freshwater to dissolve the salts. The dissolved salt is then pumped back out and either piped several miles offshore or reinjected into disposal wells. This process, called solution mining, creates caverns of very precise dimensions that can hold anywhere from 6 to 35 million barrels of oil. The average cavern can hold 10 million barrels of oil, and at 200 feet (61 meters) wide by 2,000 feet (610 meters) high, it's big enough to comfortably fit Chicago's Sears Tower inside.


While underground caverns may not seem like the best place to store an emergency oil supply, they're actually very secure. For one thing, since they're 2,000 to 4,000 feet (610 to 1,219 meters) underground, the extreme pressure prevents cracks from forming and leading to leaks [source: DOE]. Also, the natural temperature difference between the top and bottom of each cavern encourages the oil to circulate, which maintains its quality - meaning you don't have to spend money pumping to circulate the oil, it just sits there naturally churning around and kept from going stagnant through simple thermodynamics. So after the initial drilling and setup, you have a storage facility that's almost completely cost free and has an almost 0% possibility of some kind of accident or incident.

What is the Strategic Petroleum Reserve?

The oil reserve managed by the U.S. federal government helps maintain price stability in the event of a disaster. Learn about the oil reserve.

science.howstuffworks.com

.


Apparently AU doesn't actually have a lot of these, so we just rent them from the yanks: https://crudeoilpeak.info/australia-outsources-its-oil-reserve-problem-to-the-us

As mentioned, AU just leases/rents them from the yanks. There's only 20 days' of fuel onshore but we have plenty stored over in the USA that would get shipped over in a real pinch.

The americans now also have shale oil/are completely oil independent so as allies, we could just buy some of theirs in an even bigger pinch.

Buying those submarines off the yanks was not just about getting nuclear powered instead of diesel, it was about strengthening an alliance/creating some good will/putting a favour in the bank with an ally too



Oil/energy and energy security was not discovered/invested yesterday. Same with food. These types of contingencies were planned for LONG ago I can assure you of that.

Our leaders are stupid, but they're not entirely stupid.

 

[wayneL]

Australia actually uses America's strategic petroleum reserve, see here:

As mentioned, AU just leases/rents them from the yanks. There's only 20 days' of fuel onshore but we have plenty stored over in the USA that would get shipped over in a real pinch.

The americans now also have shale oil/are completely oil independent so as allies, we could just buy some of theirs in an even bigger pinch.

Buying those submarines off the yanks was not just about getting nuclear powered instead of diesel, it was about strengthening an alliance/creating some good will/putting a favour in the bank with an ally too



Oil/energy and energy security was not discovered/invested yesterday. Same with food. These types of contingencies were planned for LONG ago I can assure you of that.

Our leaders are stupid, but they're not entirely stupid.

Sure, but that still requires a supply chain. If the poo hits the propeller, it wouldn't take much to interrupt that, or for the yanks to renege.

 

[over9k]

Sure, but that still requires a supply chain. If the poo hits the propeller, it wouldn't take much to interrupt that, or for the yanks to renege.

No choke points across the pacific, and reference reneging, AU's been USA's strongest ally (along with the UK) for decades. What do you think that big sub deal they just announced was really about?

Trust me here man, AU is not going to run out of oil in 20 days.

 

[Craton]

Can you guys tell me how long it would take to get supplies here from the USA and how safe/secure would those supply tankers be?

Also, how much would we need to keep our reserves at that 20 day level?

Further, I shudder to think of the cost blow out because surely, any disruption to the status quo in the oil pipeline (pun intended) would see a dramatic rise in the barrel of oil.

Then I'm thinking there'd be restrictions to fuel usage for the average bloke and sheila right across this great land.

 

[Smurf1976]

As mentioned, AU just leases/rents them from the yanks. There's only 20 days' of fuel onshore but we have plenty stored over in the USA that would get shipped over in a real pinch.

That’s crude oil which we’ll need to refine.

Using the refineries that we’ve mostly closed and demolished......

 

[Smurf1976]

Oil/energy and energy security was not discovered/invested yesterday. Same with food. These types of contingencies were planned for LONG ago I can assure you of that.

We did indeed put plans in place over 40 years ago.

Trouble is, they were undone in the 00’s and Australia is now the only non-compliant OECD country.

We’re formally obligated to hold 90 days of net imports in stock yes, we signed up to the treaty which covers it. Hence the term “non-compliant”.

 

[wayneL]

No choke points across the pacific, and reference reneging, AU's been USA's strongest ally (along with the UK) for decades. What do you think that big sub deal they just announced was really about?

Trust me here man, AU is not going to run out of oil in 20 days.

I think in many scenarios you are probably absolutely correct, however let's go way out on the tail... and I'm kind of just wondering how fat is that tail?

No pinch points, however still lots of vulnerability.

 

[over9k]

That’s crude oil which we’ll need to refine.

Using the refineries that we’ve mostly closed and demolished......

They could refine it too then...



Annual U.S. crude oil production reached another record level at 12.23 million barrels per day (b/d) in 2019, 1.24 million b/d, or 11%, more than 2018 levels. The 2019 growth rate was down from a 17% growth rate in 2018. In November 2019, monthly U.S. crude oil production averaged 12.86 million b/d, the most monthly crude oil production in U.S. history, according to the U.S. Energy Information Administration’s (EIA) Petroleum Supply Monthly. U.S. crude oil production has increased significantly during the past 10 years, driven mainly by production from tight rock formations developed using horizontal drilling and hydraulic fracturing to extract hydrocarbons.


C'mon guys, the idea that the yanks couldn't supply us with the fuel we need is ridiculous. They can produce multi million barrels a day surplus to their own requirements and there is literally NOWHERE between AU & USA to block the shipments.

This is a non-topic.

 

[Craton]

@over9k
Not really non-topic as it's a by-product of the realisation on how fragile the pre-CV19 supply chains where and possibly, still are.

The reliance on offshore imports and lack of local manufacturing has been profoundly highlighted, I reckon that it was a real shock to many on how bad this situation could quickly escalate in a catastrophic emergency.

So yes, on topic as per the OP title:

Economic implications of a SARS/Coronavirus outbreak​

E.g. Climate change and China tensions issues aside, has this perceived oil reserve issue caused the take up and demand for EV to increase more than expected, hence increasing investment in alternative and battery technologies?

From a personal perspective, this pandemic has caused so much instability and even financial disaster for many. The mental health issues alone will have a huge economic impact.

I don't even want to think of the developmental and social issues that have impacted on our younger generations and how these will pan out, thus further implications on the economic equation.

Anyways, I'll leave the discussion to those that have far more to offer.

 

[qldfrog]

@over9k
Not really non-topic as it's a by-product of the realisation on how fragile the pre-CV19 supply chains where and possibly, still are.

The reliance on offshore imports and lack of local manufacturing has been profoundly highlighted, I reckon that it was a real shock to many on how bad this situation could quickly escalate in a catastrophic emergency.

So yes, on topic as per the OP title:

Economic implications of a SARS/Coronavirus outbreak​

E.g. Climate change and China tensions issues aside, has this perceived oil reserve issue caused the take up and demand for EV to increase more than expected, hence increasing investment in alternative and battery technologies?

From a personal perspective, this pandemic has caused so much instability and even financial disaster for many. The mental health issues alone will have a huge economic impact.

I don't even want to think of the developmental and social issues that have impacted on our younger generations and how these will pan out, thus further implications on the economic equation.

Anyways, I'll leave the discussion to those that have far more to offer.

look at the UK petrol crisis too; sure has nothing to do with covid, I would bet not a single petrol tanker truck has been cancelled due to a driver being unable to jump at the driving seat due to sick from Covid, yet..no delivery, panic and you got:
https://www.reuters.com/world/uk/uk...y-panic-buying-hits-fuel-supplies-2021-09-27/
and yet we still have petrol there; seen the bog roll panic, how long before we grind to a halt, was at a Coles this afternoon, shelves were empty..I should have taken a picture..That's what happens when my clever Premier block the trucks in to show how muscular and braindead she is
SO we just need to start a panic rush and we collapse; they had put back again the row heads with toilet paper and by next monday we will probably be back in lockdowns (after the final is over)..dumb and dumber..thanks God i do not have to have my business running , can afford to close it..good bye O/S payment streaming into OZ and with 2nd jab today I am soon ready to get out of here

 

[Smurf1976]

C'mon guys, the idea that the yanks couldn't supply us with the fuel we need is ridiculous. They can produce multi million barrels a day surplus to their own requirements and there is literally NOWHERE between AU & USA to block the shipments.

The issue is that pretty much everyone would have said that prior to the pandemic.

Ask whatever car manufacturer about their supply of IC's and they'd have said nothing to worry about, don't be silly. Same with all manner of other things until supply actually dried up.

Same as if someone had asked the UK government, the EU or China they they too would likely have said nah, we won't be shutting down factories in September 2021 because of an energy shortage don't be silly. And yet here we are with exactly that happening, manufacturing output is being cut.

Focusing on the economics of all this, bottom line is energy prices are rising sharply and in the case of Europe and China supply is now physically scarce to the point of curtailing industrial production. In China's case looking at possibly less food being made too: https://finance.yahoo.com/news/china-warns-food-security-energy-035319350.html

Now if there's one thing about bull markets in shares it's that with one exception, every one of them since WW2 ended with an energy price hike (not counting routine corrections and "flash crash" type events). The one thing that has been missing for a market top is now starting to fall into place.

 

[divs4ever]

what we lack ( due to decisions taken ) is adequate local refining capacity , we have plenty of the raw resources ( and then shipped overseas for processing , where we then import much of our fuel needs )

 

[over9k]

The issue is that pretty much everyone would have said that prior to the pandemic.

Ask whatever car manufacturer about their supply of IC's and they'd have said nothing to worry about, don't be silly. Same with all manner of other things until supply actually dried up.

Same as if someone had asked the UK government, the EU or China they they too would likely have said nah, we won't be shutting down factories in September 2021 because of an energy shortage don't be silly. And yet here we are with exactly that happening, manufacturing output is being cut.

Focusing on the economics of all this, bottom line is energy prices are rising sharply and in the case of Europe and China supply is now physically scarce to the point of curtailing industrial production. In China's case looking at possibly less food being made too: https://finance.yahoo.com/news/china-warns-food-security-energy-035319350.html

Now if there's one thing about bull markets in shares it's that with one exception, every one of them since WW2 ended with an energy price hike (not counting routine corrections and "flash crash" type events). The one thing that has been missing for a market top is now starting to fall into place.

Sure but microchips aren't oil and Australia isn't over a billion people. Apples & oranges on both counts.

 

[over9k]

Bit of a virus snoozefest last week with evergrande and the evergrande stuff threw a wrench in the works with everything else going on but now that's in the rear vision mirror (mostly) we can get some clarity on the inflation swing play being back on the cards.

With the winter energy crisis that's hitting so energy & banks are screaming whilst tech is plunging.

I posted a while back how much back & forth there was last time this happened:

And we're getting round two now, here's our first proper divergence in weeks:

View attachment 130770

So it's time to get busy. Swing plays abound.


In answer to your question, we're heading into winter so I think there's stacks of volatility/inflation fears/etc etc to be had yet. Because those who don't trust the vaccines generally work in the lower skilled jobs like truck driving, ship unloading, pipe fixing (plumbing) etc that actually provide/transport all of our needs like food, energy etc, this gives us supply problems, which drives prices (inflation) up. Combine that with winter being a much worse environment for virus spread and it's bad juju all round.

So, keep a very close eye on the supply side of this. Anything you can think of that will effect supply and thus prices (inflation). Things like truck drivers being convinced (or compelled) to get the vaccines, that sort of thing. This is a pure supply side phenomenon.

Called it:





I'd be willing to have a bet (with the loser making a donation to a charity of the winner's choice) with anyone that thinks that AU is going to run out of oil. It won't happen.

Even europe's energy crunch is gas, which is largely used for heating, not oil:



Why do you think all the articles are talking about how cold the winter is going to be and how much wind and rain they're going to get?

Very little energy is actually produced (converted) with oil. Aside from car engines, pretty much everything else is done with gas, coal, electricity etc etc:



Hence the concern (over there) about whether the wind is going to blow, how much water is in the dams etc etc. Gas is up fivefold whereas oil is only "just" at about $75/barrel. Not even doubled.




If anything gets run out of, it's not going to be oil.