WTF is Happening to the Market (and more!)
Russia and Saudi Arabia Decide to Drill Baby Drill, Screw Everyone Else Over
This time last week, Saudi Arabia launched a price war against Russia that caused the price of oil to dramatically plummet and shock the market.
Wait. So, just what the hell happened?
Let’s break it down.
A price war is when retailers cut prices in an attempt to increase their share of the market.
Well… back in 2016, Saudi Arabia and Russia came together to form the OPEC+ alliance. To push oil prices up, they coordinated to cut oil supply by 2.1 million barrels per day. Jump forward to March 2020, in the midst of weaker consumption, Saudi Arabia wanted to increase cuts to 3.6 million barrels per day, but Russia was not having it.
Russian concerns over increasing American shale oil production led the Russian Energy Minister to announce that they would not cut production, and would instead start producing as much as they please as of April 1st. In retaliation, a very pissed off Saudi Arabia slashed its crude prices and has threatened to increase output. This price war and decreasing oil demand due to declining global consumption in the wake of COVID-19… cue oil free fall.
Hold on… OPEC+?
OPEC (Organization of the Petroleum Exporting Countries) +
10 non-OPEC nations (with the goal to push up oil prices with production cuts)
But it’s oil, it’ll bounce back, right?
Ideally, yes. In the past, reduction in the price of oil leads to increased consumption because it’s cheaper. However, now with COVID-19, the demand for oil is expected to fall for the first time since 2009. This will have a serious impact on the economies of oil-producing countries (including a BIG sucker punch to the Canadian energy sector – just look at that Western Canadian Select price in the ticker above), all while Russia and Saudi Arabia are estimated to have reserves of over $500 billion, which gives them ample room to weather this economic storm.
Oil shocks? COVID-19? Markets crashing? Cheers 2020, we h8 you already.
Freaked out by market turmoil in the wake of COVID-19? Here’s are some tips for coping with financial stress.
So, as we now know, the stock market crashed hard last week, and we’ll be feeling the effects for a while. The combination of a global health and economic crisis is terrifying, but there are a few things you can do to deal with financial uncertainty in the short-term.
1) If you need to take out a loan or mortgage, now is the time! The Bank of Canada has made yet another interest rate cut, which means that the rates for borrowing will be lower than they’ve been in a while.
2) Bored at home? Why not fill your time by doing your taxes before the April 30th deadline (LOL, sorry)! Take advantage of tax benefits to maximize your return or reduce the amount you owe. Having more cash available will help during a time of uncertainty, plus, doing your taxes early will take some weight off your shoulders.
3) Keep track of unnecessary purchases while practicing social distancing and work them into your daily routine. If you’re spending more time indoors, you’re less likely to buy that extra coffee in the morning or eat out for lunch multiple times a week. Consider cutting that spending even after the isolation period is over, or find a smaller, local business with lower prices to satisfy your weekly cravings.
4) Don’t forget to take care of your mental health and overall wellness. Financial crises are stressful enough as it is, but now we’re also dealing with the COVID-19 pandemic, self-isolation, and social distancing. This can cause additional strain on your mental state, so make sure you take measures to reduce panic and contact crisis services if needed.
If you’re in a good financial position despite the economic downturn, consider helping those in need. COVID-19 and financial instability will be especially hard on low-income families, small businesses, people who are precariously employed, and people with limited mobility or health conditions. Look for ways you can provide support in your community – your local food bank is a great place to start!
Btch, You Thought: COVID-19 and Precarious Work
For many of us, coronavirus shutdowns mean financial uncertainty. We’ve taken a deep dive into how women and racialized folks will be affected.
The bottom line?
When social distancing ends in a couple weeks, 22%-45% of the population will have struggled with receiving income, making rent, paying bills, and affording preventative care, mostly due to the status of their employment and little-to-no social protections. Women will be most impacted.
Read our deep dive into COVID-19 and its economic impact here.