Mike Sommers, president & CEO at the American Petroleum Institute, talks the impact of the coronavirus outbreak on the American oil and gas industry. In commodities markets, there has been a dramatic reaction. Globally, oil and refined petroleum products, like jet fuel, diesel and gasoline, have been hit by fears the virus will slow global transportation and chill commerce and travel within China. Brent crude futures are down 4.5% for the week so far, about the same as copper futures, which have fallen on fears of Chinese slowdown could hurt global growth.
“When we compare it with SARS, it looks like the mortality rate is lower. A counter point is that China is far more connected with the rest of the world than it was in 2003. I think the number of people from China flying around the world has gone up by five to 10 times than it was in 2003,” said Mark Williams, chief Asia economist at Capital Economics.
Williams noted SARS impacted China’s economy by 5 percentage points and quickly bounced back. But he said it’s too soon to even try to gauge the impact of the current virus.
“As long as people think it is going to pass, then the impact on actual production will actually be quite small,” he said. “At some point, people will return to the shops. It isn’t like a long run impact on demand.”
The virus has roiled markets just as investors have been looking for benefits from the U.S.-China trade agreement, signed by the two countries earlier this month.
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