The emergence of a deadly virus in China could dampen demand for oil for months to come as global health officials try to contain the growing outbreak.
More than 50 million people in central China are on lockdown after the deaths of more than 100 people from a new strain of coronavirus. Trains, buses and airplanes sit idle in quarantine-blocked Wuhan, the central Chinese city of 11 million where the outbreak began last month. China, usually the world's biggest importer and second largest consumer of oil, is buying less crude than it otherwise would as fewer people travel within the massive country.
Coronavirus is also having a major impact on international travel: The United States and other countries are urging their citizens to avoid all nonessential travel to China. Concerns about the respiratory virus could result in a drop of demand of 260,000 barrels per day in 2020, Goldman Sachs wrote in a note last week, with consumption of aviation fuel hit the hardest.
“It’s fear that’s gripping the market,” said Patrick De Haan, a petroleum analyst at GasBuddy. “This virus is most notably affecting demand in China.”
Already, the international Brent benchmark for crude is down from $66 at the beginning of the month to around $59 on Wednesday.
Yet analysts say concerns about a massive spread of the virus — and potentially slower global economic growth overall— may depress energy prices even further.
"The threat of a pandemic is having a larger effect than the effects of the actual outbreak," said Sophie Udubasceanu, global oil editor at the market analysis firm ICIS. "The scale of the problem is still unknown."
Doctors have spotted the pneumonia-like illness in more than a dozen-and-a half countries, including Thailand, Taiwan, Japan, Singapore and the United States. Still, the vast majority of the more than 4,500 people infected so far live in China, where scientists say the virus was transmitted to humans at a live animal market in Wuhan.
China has been down this road before. During a 2003 epidemic of severe acute respiratory syndrome, or SARS, in China, energy demand took a similar downturn. The price of oil slumped from around $35 per barrel to under $25 per barrel, according to ICIS, in March of that year after the World Health Organization issued a global alert about the virus linked to that disease.
If the latest outbreak becomes a "SARS-style epidemic," JPMorgan said in a research note, it could trim $5 off the price per barrel.
Major oil-producing nations, including Saudi Arabia, are aiming to reassure the jittery market. Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement that impact seen so far in oil and other commodity markets is "primarily driven by psychological factors and extremely negative expectations adopted by some market participants."
The Saudi kingdom and other nations in the Organization of Petroleum Exporting Countries will meet in March where they will debate whether to further cut petroleum production in response to the decreased demand.
Before then, U.S. drivers may see a further decrease at the price at the pump. In January, the national average for gasoline has already fallen by around 7 cents, to $2.50 per gallon on Wednesday.
The coronavirus outbreak, said De Haan, "will likely accelerate the downward movement of gas prices over the next week or two."
— Warren releases infectious disease plan amid deadly outbreak: Sen. Elizabeth Warren's (D-Mass.) latest proposal addresses ways to prevent, contain and treat infectious diseases and specifically cites the role climate change plays in disease outbreaks. The plan, detailed in a post on Medium, refers to infectious diseases such as Zika virus that have spread rapidly and more broadly because of rising temperatures that have allowed mosquitoes to thrive in more areas.
- The details: Her plan calls for recommitting to the Paris climate agreement on the first day of a Warren administration, “including meeting Obama era commitments to the Green Climate Fund — a critical funding stream to prevent the spread of climate fueled pandemics — and backfilling the contribution that the Trump administration neglected to deliver.” She calls for scientific research to assess how rising temperatures will impact disease emergency and transmission. The plan also includes investing in the Center for Disease Control and Prevention’s climate and health program to invest in “adaptation for the effects of climate change on our nation’s health.”
Hi @JoeBiden,— Tom Steyer (@TomSteyer) January 28, 2020
This is no way to treat an Iowan. He said he'd vote for the Dem in the general b/c he knows how important it is to beat Trump.
We need immediate action on climate. If you don't agree, happy to talk @ debate.
But don't take it out on voters we need to win in Nov. https://t.co/gG6UTDGL15
— On the trail: Billionaire activist Tom Steyer criticized Joe Biden for an exchange the former vice president had with a voter who said he planned to vote for Steyer in the Iowa caucuses. In a clip shared on Twitter, a voter tells Biden he would vote for him in the general election if he’s the nominee, but questions his support for replacing gas pipelines.
- The exchange: “What are we going to do about climate change?” the man asked. “Now, you say you’re against pipelines, but then you want to replace these gas lines, and that’s not going to work. We’ve got to stop building and replacing pipelines.” Biden responds by telling him to “go vote for someone else.” After Biden implies the voter intends to support Sen. Bernie Sanders (I-Vt.), the voter says he’s “actually supporting Tom Steyer.”
- Steyer chimes in: “We need immediate action on climate. If you don’t agree, happy to talk @ debate,” Steyer tweeted. “But don’t take it out on voters we need to win in Nov.”
— Debate over Pennsylvania plant highlights dilemma for Democrats: A giant petrochemical plant being built by Royal Dutch Shell 30 miles from Pittsburgh is a symbol the latest divide within the Democratic Party. Pittsburgh Mayor Bill Peduto says support for the plant undermines the party’s climate agenda, putting residents’ health as well as white-collar jobs at risk, The Post’s Tim Craig reports. But other leaders point to the plant as a “catalyst for a region’s economic revival and an opportunity to win over a white working class that believes Democrats have prioritized social issues over their financial prosperity.”
- “In Pennsylvania, everything matters right now”: “With Pennsylvania expected to be a crucial battleground in the 2020 presidential contest, the local fissure is highlighting a national dilemma for the Democratic Party as it tries to address the environmental demands of liberal urban activists while reaching out to voters who rely on the manufacturing industry for jobs.”
- What about the candidates?: “Peduto said he is leaning toward [New York mayor Mike Bloomberg] and [former South Bend, Ind., mayor Pete Buttigieg] because the energy policy positions of [Sanders] and [Warren] — who support a ban on fracking — ‘would be devastating to the Rust Belt.’ Conversely, Biden’s positions, he said, ‘are more like Donald Trump’s than they are a pragmatic approach toward the middle.’ ”
— A potential experimental fish farm in Florida: The Environmental Protection Agency held a public permit hearing yesterday to consider whether to approve the Velella Epsilon aquaculture project, which could be the first finfish aquaculture project in the gulf, The Post’s Laura Reiley reports. The project would raise 20,000 almaco jack fish for human consumption every year.
- Why it matters: Projects like this have so far been kept to state-controlled waters, but this would be a first in federal waters in the contiguous United States.
- The bigger picture: “The prospective demonstration farm from Hawaii-based Ocean Era has engendered strong opposition from local residents and environmental groups, who worry that setting a chain-link mesh pen in open water 45 miles southwest of Sarasota would upset the ecosystem and establish a precedent of privatizing federal waters, paving the way for more farms.”
— A proposal to protect crayfish in Appalachian coalfields: The U.S. Fish and Wildlife Service proposed this week protecting 445 miles of habitat for the Guyandotte River crayfish and Big Sandy crayfish in coalfields in West Virginia, Kentucky and Virginia, the Center for Biological Diversity says. The designations, which follow a petition and lawsuit from the center, are meant to add protections for the crayfish there, the group says, noting it's already illegal to harm the crayfish. Wildlife advocates say mountaintop removal and other forms of coal mining can put the species' habitat at risk
- The reaction: “These protections throw a lifeline to these rapidly vanishing crayfish, which are being snuffed out by coal-mining pollution,” Perrin de Jong, an attorney with the center, said in a statement. “Protecting the habitat of these unique species will not only help prevent their extinction, but safeguard water quality for people too.”
- Just last year: The Trump administration allowed drilling to resume at coal mines in West Virginia with a June 2017 policy, a move that occurred over “objections of the agency charged with protecting endangered wildlife — in this case, two crayfish species that help keep the state’s creeks and rivers healthy,” The Post’s Juliet Eilperin wrote last year.
— GOP senators want answers about EV tax credits: A group of Republican senators sent a letter to the IRS calling for details about the enforcement of an electric vehicle tax credit, referring to findings that revealed $33 million in tax credits were awarded incorrectly in 2010.
- What they wrote: The group, led by Sen. Chuck Grassley (R-Iowa), pointed to the Treasury Department’s internal watchdog, which released an audit in 2011 that found “$33 million in tax credits for plug-in electric drive motor vehicles — one in five of every claimed tax credit — were awarded to individuals who owned vehicles that did not quality. In other words, despite recognizing this fraud eight years ago, it has not only persisted but become even more widespread.”
- Meanwhile: “The letter comes as a number of lawmakers, particularly Democrats, have expressed interest in expanding electric vehicle tax credits. A few Republicans have joined with Democrats in backing an expansion, but many others have been highly critical of the credits,” the Hill reports.
— Guardian to ban fossil fuel advertising: The British news publication announced it "will no longer accept advertising from oil and gas companies, becoming the first major global news organisation to institute an outright ban on taking money from companies that extract fossil fuels." Greenpeace and other environmental groups are pushing news organizations to forgo placing ads from fossil fuel companies that attempt to "greenwash" their contributions to climate change.
— “The whales just kept coming”: A study published this week sought to make sense of why humpback whales kept getting tangled in fishing gear in Monterey Bay in California a few years ago. In the report, the scientists “showed how one dramatic shift in the marine ecosystem, exacerbated by an ever-warming planet, could set off a domino effect across California,” the Los Angeles Times reports.
- Here’s what happened: “An unprecedented heat wave in the Pacific Ocean, dubbed ‘the blob,’ had pushed anchovies and other humpback food closer to shore — right where most Dungeness crab fishermen tend to set their gear. The crab season, in turn, had been unusually delayed by the blob, so fishing did not peak until the whales started coming into town.”
— Millions faced polluted air in 2018: A new report found a third of all Americans — about 108 million people — lived in areas with at least 100 days of poor air quality because of air pollution in 2018. The report, from Environment America Research & Policy Center, Frontier Group and U.S. PIRG Education Fund, specifically highlights ground-level ozone and fine particulate pollution, which can both be released by fossil fuels.
- The worst locations: The Los Angeles-Long Beach-Anaheim metropolitan area in California was listed as the most populated region with more than 100 days of elevated air pollution, experiencing 156 of these days in 2018.
- The Senate Environment and Public Works Committee holds a hearing "to examine stakeholder perspectives on the importance of the United States Chemical Safety and Hazard Investigation Board."
— "Lucky dog": David MacNeil, the cheif executive of the suburban manufacturer WeatherTech, is using a Super Bowl ad to thank the veterinary school that saved his dog's life, The Post's Kim Bellware writes.