Economic implications of a SARS/Coronavirus outbreak

[divs4ever]

run out of crude probably not , difficulty supplying petrol and diesel ( and kerosene ) to the pumps MAYBE

BPT has several capped wells waiting to go into production ( i assume waiting for an attractive price ) , i would guess some other players would have some capped wells also , HOWEVER several older refineries are being repurposed into storage facilities , and we MIGHT have a transport problem coming to boot

now gas will depend on how much we export ( and how much is kept for local consumption )

 

[over9k]

Again, if you're focusing on oil here, you're focusing on the wrong thing. Oil's up about 80%. Gas is up 500.

 

[over9k]

Meanwhile, here's your swing play:

 

[qldfrog]

run out of crude probably not , difficulty supplying petrol and diesel ( and kerosene ) to the pumps MAYBE

BPT has several capped wells waiting to go into production ( i assume waiting for an attractive price ) , i would guess some other players would have some capped wells also , HOWEVER several older refineries are being repurposed into storage facilities , and we MIGHT have a transport problem coming to boot

now gas will depend on how much we export ( and how much is kept for local consumption )

The issue is indeed capacity and time required to do any large scale transformation.
When it takes a week to have a parcel in qld from victoria after just a couple of sneeze....
not optimistic on the ability to do anything of scale if tankers do not dock at the terminal..but we will have grid power at midday daily.

 

[qldfrog]

The issue is indeed capacity and time required to do any large scale transformation.
When it takes a week to have a parcel in qld from victoria after just a couple of sneeze....
not optimistic on the ability to do anything of scale if tankers do not dock at the terminal..but we will have grid power at midday daily.

In Syria, people where pinching crude and refining it in kitchen and shed process.so man ingenuity is high
will be harder here with health and safety inspector, EPA rulings and local council zoning?.
More importantly, doubt many of the gender studies PhDs will be any good at it.
To go back on the more immediate effect, has anyone else noticed empty supermarket shelves or was my Coles experience yesterday just a late delivery truck or a punctual issue?

 

[over9k]

Hard selloff into the close, closing at session lows. I haven't rotated or deployed any cash yet. Tomorrow will be telling.

 

[wayneL]

@over9k

I don't think anybody is making the case that we *will run out of oil. The case, or at least case I'm making is that we are quite vulnerable to a tail occurrence.

Let's say China moves on Taiwan, that could set off a chain of events that could leave us isolated for supplies of, well, all sorts of sh¹t.

Will that happen?

Probably not but, it could and we could be seriously farked if that does go down.

 

[over9k]

@over9k

I don't think anybody is making the case that we *will run out of oil. The case, or at least case I'm making is that we are quite vulnerable to a tail occurrence.

Let's say China moves on Taiwan, that could set off a chain of events that could leave us isolated for supplies of, well, all sorts of sh¹t.

Will that happen?

Probably not but, it could and we could be seriously farked if that does go down.

How?

Like I said, the oil will just come across the pacific from USA.

 

[Smurf1976]

Gas is up fivefold whereas oil is only "just" at about $75/barrel. Not even doubled.

The real concern though isn't that oil's at $75 but the trend in price. It's up almost 50% year to date.

Natural gas is getting seriously expensive not only in Europe but in any place with pricing linked to LNG.

Coal also expensive and with physical shortages in some places (notably China).

Oil not yet expensive but it's rising.

Put together that increases the cost of producing and delivering every physical item from food to electronics. It also increases consumer living costs and the cost of running other facilities (buildings etc). That sounds rather inflationary to me.....

 

[over9k]

The real concern though isn't that oil's at $75 but the trend in price. It's up almost 50% year to date.

Natural gas is getting seriously expensive not only in Europe but in any place with pricing linked to LNG.

Coal also expensive and with physical shortages in some places (notably China).

Oil not yet expensive but it's rising.

Put together that increases the cost of producing and delivering every physical item from food to electronics. It also increases consumer living costs and the cost of running other facilities (buildings etc). That sounds rather inflationary to me.....

Of course. But we were talking about a societal collapse on account of coronavirus.

My point was that it won't be the oil price/an oil shortage that does it.

 

[wayneL]

How?

Like I said, the oil will just come across the pacific from USA.

Ok I realise I'm getting way way way out into black swan territory here, but let's say China and the US have a nuclear exchange and all West coast ports are disabled for some time, suppose China, really having the sh¹ts with Australia, use their navy to disable sea traffic to us.

Let's say the San Andreas fault finally cracks the big one and the modelled tsunami takes out just about the entire Southern US coast.

Let us even suppose that at some point in the future a us administration imposes sanctions on Australia for our newfound totalitarianism (as has already been proposed over there).

All unlikely, but possible. And that's just a couple of scenarios out of a whole basket of unknown unknowns.

 

[over9k]

Ok I realise I'm getting way way way out into black swan territory here, but let's say China and the US have a nuclear exchange and all West coast ports are disabled for some time, suppose China, really having the sh¹ts with Australia, use their navy to disable sea traffic to us.

Let's say the San Andreas fault finally cracks the big one and the modelled tsunami takes out just about the entire Southern US coast.

Let us even suppose that at some point in the future a us administration imposes sanctions on Australia for our newfound totalitarianism (as has already been proposed over there).

All unlikely, but possible. And that's just a couple of scenarios out of a whole basket of unknown unknowns.

0% probability

Let's move on:

U.S futures deep into the green 1 hour before the ASX close so I've just bought some LNAS.

 

[Smurf1976]

I don't think anybody is making the case that we *will run out of oil. The case, or at least case I'm making is that we are quite vulnerable to a tail occurrence.

This.

There's quite a few opportunities to go wrong when you're reliant on supplies from x, who is themselves reliant on raw materials from y, and are outright stuffed if you don't get the product delivered.

My perspective simply comes from life experience and that of being involved with the doing of physical things, including for government. A contract's all well and good until the proverbial hits the fan and once that happens, well the thing that loses every time is physical delivery. When push comes to shove, contracts might be worth $ but there's no actual guarantee of physical delivery - that which can't be done won't be done.

In the context of all this, the real issue isn't so much about probability but consequence.

Reduce the available supply of energy and one way or another you've shrunk the economy. Something has to go, it has to not happen, and that has implications.

Looking at the recent pandemic, it dropped Australia's oil consumption (for all uses in total) by roughly 20%. So that's what a 20% cut in oil supply looks like - major disruption.

Now scale that to whatever figure you care to pick but point is, there's a lot of broad disruption to society and the economy from any disruption to fuel supply. Regardless of how likely or unlikely it is, if it does happen then the economic impact is major.

That said, in the short term it's not something I personally see as a problem. The stuff is flowing right? It's a risk that could blow up someday but right now it hasn't.

What I do see as relevant is the simple point that there's historically a high correlation between energy price shocks and major stock market tops and we do indeed have substantially increasing energy prices across major energy resources at the moment.

That's not to say I think the market has topped out already but historically the situation of rising energy prices > rising inflation > rising interest rates has tended to end badly so I'm paying attention.

 

[over9k]

My point was that if you're focusing on oil, you're focusing on the wrong thing. If things get KO'd, it will be by electricity and/or gas shortages, not oil.

Even if you're right, something else will do us in long before oil does.

 

[Smurf1976]

But we were talking about a societal collapse on account of coronavirus.

I wasn't interpreting the thread quite so drastically.

I'm seeing it as simply economic impacts - businesses shut, costs increased, supply chain disruption and so on is a definite economic impact even if society as a whole carries on.

Pandemic > disruption to lots of physical things including energy industries > physical shortages and price impacts.

Same with anything. Every worker who's spent time sitting at home in lockdown, without being able to carry on working because they do something physical, means lost labour from the economy. It means something didn't get made, built, maintained, repaired or whatever and in due course the effects of that are going to show up.

Energy prices would seem to be an early and obvious example of those effects.

 

[wayneL]

Nothing is 0% probability.

I would have thought that 2020 and 2021 would have taught you that.

 

[over9k]

I wasn't interpreting the thread quite so drastically.

I'm seeing it as simply economic impacts - businesses shut, costs increased, supply chain disruption and so on is a definite economic impact even if society as a whole carries on.

Pandemic > disruption to lots of physical things including energy industries > physical shortages and price impacts.

Same with anything. Every worker who's spent time sitting at home in lockdown, without being able to carry on working because they do something physical, means lost labour from the economy. It means something didn't get made, built, maintained, repaired or whatever and in due course the effects of that are going to show up.

Energy prices would seem to be an early and obvious example of those effects.

It started from wayne talking about buying 44 gallon drums of diesel and just snowballed from there.


Energy pricies, oil futures etc are down today and the nasdaq futures have been in the green and steadily rising all day so I bought some LNAS this afternoon, so I've just made my first swing play of this particular cycle.

 

[wayneL]

It started from wayne talking about buying 44 gallon drums of diesel and just snowballed from there.

Well that was a little bit tongue in cheek. However I am half serious about that. I do now have a years supply of non perishable food, a veggie garden and a few chooks... And yes the prospect of horse meat jerky is real.

I do not have a 44-gallon drum of diesel, but I do have a couple of tonne of coke for the forge so maybe I could swap some blacksmithing jobs for diesel if the s*** hits the fan.

When problems happen, and I know this is a cliche, they happen gradually and then all at once.

I'm not one to go out and riot and fight for sh¹t, so I prefer to just have some strategic capacity to survive if things turned to crap... If not, nothing ventured nothing gained, we can eventually eat the 16 pallets of baked beans and supply our neighbours with eggs for the next decade, LMAO.

 

[Gunnerguy]

Sell lots of ASX8000 November Calls and you’ll be just fine.
Gunnerguy

 

[wayneL]

Interesting survey from the nomad capitalist.... This fellow basically has a channel about escaping the USA to better jurisdictions as far as taxation and liberty is concerned.

As a significant portion of our GDP relies on very high immigration, the result of 11% may be a harbinger of lower future economic growth from this source.

Couple that with the willful destruction SMEs by our petty tyrannical state premiers, and the absence of any sort of economic leadership from The Lodge, and things really don't look good outside of digging up s*** and sending it to China.