Publications: Notes at the Margin

Defeated by the Virus (November 2, 2020)


Epidemiologists are much better forecasters than economists. Last spring, these scientists warned that the novel coronavirus would return in the fall and the impact would be more severe. They were correct. Friday, the United States experienced a record single-day level of infections. New cases of Covid?19 were rising strongly in Europe as well.


Only countries like Taiwan, China, and New Zealand have the disease under control after moving aggressively to suppress it and implementing effective contact tracing.


The pandemic is spreading rapidly and seemingly at will, though, in Europe and the US. Economic activity is slowing in response even as politicians try to avoid shutdowns and lockdowns. Forced closings are irrelevant, however. The threat of contracting the virus has caused much of the population to hunker down and avoid contact again. The parts of the economy that profit from social interaction are being forced to cease operations by public shunning. Hotels and restaurants are seeing little business. Shopping malls are deserted. At hospitals, demand for elective procedures and nonessential services is drying up.


Petroleum product suppliers are feeling the pinch, too. Refiners and petroleum marketers are watching sales shrink as consumers reduce their travel. The decline can be seen in jet fuel because few are interested in flying even if the economy is “open” and in gasoline and diesel given the fewer miles driven due to closed offices and retail stores and the fear of contracting the virus during vacation trips or visits to relatives.


Despite these circumstances, national governments offer little or no help to petroleum refiners and marketers or crude oil producers.


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