"I hope the coronavirus crisis helps end the obsession with free trade and comparative advantage as a way of organising the global economy. It was always a fantasy as I have explained before,” Steve Keen, the author of Debunking Economics and the world’s first crowdfunded economist, says, adding that the coronavirus outbreak could have massive ramifications for globalisation and could sound the death knell for the oil industry.
Quick future of tourism from me: catering more to domestic market; tangible purpose beyond growth; diversification of revenue streams; bringing supply chains closer to home; contributing to health of local populations (& secondly guests). All key components of #sustainabletravel— Holly Tuppen (@HollyTuppen) April 29, 2020
UK in Disastrous Position
Britain imports half of its food - the vast majority of it from the European Union: pasta from Italy, cheese and wine from France, fruit and vegetables from Spain, nuts and olives from Greece and grain from eastern Europe and meat and fish from various countries.
Last month the managing director of Merseyside-based food importers Peter Gilding told Sputnik the wholesale price of fruit had gone up because international transportation costs had risen.
Happy Earth Day! 🌎 Let's take a moment to learn how the marine shipping industry is moving towards a more sustainable future. Our latest blog provides an overview of the main wind power technologies being developed and implemented on board ships: https://t.co/KE45sgWgIp pic.twitter.com/6vxHZz7XnH— Clear Seas Centre for Responsible Marine Shipping (@ClearSeasOrg) April 22, 2020
Prof. Keen says: “In the post-coronavirus world, the emphasis in most countries will be to build resilient local supply chains. The UK is in a disastrous position on that front, especially on food production where it apparently imports close to 50 percent of its needs.”
While Britain is never going to be able to produce citrus fruits or exotic vegetables at home, there are area where it could be resurrect industries, such as steel, to stave off the need for huge imports.
For those who think coronavirus marks the end of globalisation - my counter. Global supply chains have been working, consumers want the choice, and no country can make everything they need. Even those zoom meetings don't replace the need to travel... https://t.co/hVTnpzfmad— David Henig (@DavidHenigUK) April 15, 2020
Prof. Keen says: “Rebuilding manufacturing capability in an era of global warming should be the policy emphasis rather than trade.”
On Tuesday, 28 April, BP announced a record loss of US$6.5 billion (£4.4 billion) and said it planned to shed 7,000 jobs.
Viewpoint: investment in the oil industry is falling and the massive glut that we are seeing today will turn into a massive supply shortage in the future. #OOTT— Amena Bakr (@Amena__Bakr) April 26, 2020
Oil Crisis Will Reshape Industry
The oil industry has been hit hard by the shutdown, with demand for petroleum, refined oil and plastic plummeting and the price of oil dropping to a negative value.
Prof. Keen says: "The oil glut coming out of the collapse in demand from the coronavirus, plus the realpolitik battles between Saudi Arabia and both Russian and American shale oil producers will, I expect, completely reshape the oil industry."
He said he understood it was hugely expensive to stop oil wells flowing - because the oil is under pressure and needs to be physically blocked to stop it coming to the surface - and it would be “uneconomic” to reopen many wells after the crisis.
People in the north east will be worried about their jobs, their families and future of oil and gas sector.— Jackson Carlaw MSP (@Jackson_Carlaw) April 28, 2020
UK Government support has delivered billions of pounds in recent years.
Nicola Sturgeon has to take urgent action to save 30,000 jobs #FMQs pic.twitter.com/3NHeFK3odq
He said that meant that shale oil producers, who need a price of between US$30 and US$50 a barrel to survive, were “probably finished”.
"Only Saudi Arabia, which I am told can produce at a cost of about $3 a barrel, will be guaranteed to be profitable, but the Saudi state's expenditure needs a far higher price than that. So they may attempt to commandeer all of the available demand once it begins to recover," says Prof. Keen.
He adds: "The geopolitics of that are unthinkable for America and Russia and probably Europe, so I can see a strong push towards electric vehicles. All in all, this implies a bloodbath for existing oil companies."
Prof. Keen also said that tourism will almost cease until the virus is eradicated.
"The need for social distancing on planes will make business class the cheapest available fare. So the demand for aviation fuel will collapse," he emphasizes.
6.6% Fall in German GDP - Optimistic Estimate
On Tuesday, 28 April, the German economic institute Ifo said the country’s economic output had plummeted by 16 percent since the lockdown began and would probably fall by 6.6 percent over the calendar year.
The German economy suffered a deeper-than-anticipated slump at the start of the second quarter as coronavirus-related restrictions led to a collapse in demand https://t.co/4WZF9jKJX7 pic.twitter.com/jOHTcT45A7— Bloomberg Markets (@markets) April 23, 2020
But Prof. Keen says: “I think a 6.6 percent fall in GDP is an optimistic estimate of the damage coronavirus - and most importantly, our poor response to it - will ultimately do. I think a fall in GDP of the order of 10-20 percent for the year is more likely.”
The infectious diseases and complex systems specialist Baneer Yar-Bam pointed out recently humanity could have eliminated the virus completely with a strict five week lockdown.
Prof. Keen says: “To have done that, all but essential work - meaning food production and distribution, electricity, sanitation, and health - would have stopped for two weeks. It would have resumed for the fraction of the population without the virus after two weeks and then full economic activity would have recommenced after five weeks.”
He said that would have meant companies who represented 75 percent of GDP would have ceased completely for two weeks.
"So to get an outcome only about twice as bad as the best possible outcome would be, I think, miraculous - and unlike President Trump I don't believe in miracles,” says Prof. Keen.