What we know on coronavirus impact on oil prices tumbling

Thursday, April 9, 2020
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Oil prices have tumbled since the virus began, multiplying across the nation but while it may be good for consumers, it comes at a price.

HOUSTON, Texas (KTRK) -- The US is trying to stop the spread of the coronavirus, along with the casualties it brings. Houston is doing the same, while dealing with another threat at the same time.

Oil prices have tumbled since the virus began, multiplying across the nation. While it may be good for consumers, it comes at a price.

Halliburton has laid off several thousand workers across its systems. Exploration is on hold and rigs are being shut down.

Doctor Steven Klineberg with the Kinder Institute said it couldn't come at a worse time because the global economy is all but shut down, too. Another oil downturn could have a cascade effect.

Houston was the oil and gas capitol of the world in 1982. In May of that year, oil fell and the Texas recession began. It went from oil to real estate to companies that specialized in the parts and machinery that fueled oil exploration. Every part of the state felt the loss.

Klineberg said there's still an appetite for energy, but in different forms.

"Renewable energy, like wind energy, all kinds of technologies that Houston needs to develop in a rapid way or else the energy revolution will pass us by," said Klineberg.

The latest plummet in prices came at the same time the coronavirus arrived in the US. Saudi Arabia and Russia engaged in a show down, each flooding the market with oil at a time when stay-at-home orders were put in place. This turned into people seeing less of a need for gas because they did not have to commute to work.

Consumption fell, as did prices.

"The massive layoffs in the oil industry across the board are going to take a long time to restore, and higher prices for oil aren't going to be sustained because people don't want to use oil and gas anymore. They want renewable resources for very good reasons. Like climate change," he said.

At the same time, Houston is seeing less revenue, police, firefighters and other city and county employees testing positive for the virus. Businesses not deemed essential are shuttered. Some businesses, including local restaurants, may not reopen.

The stay-at-home order however, had a positive impact, which is what Bill Fulton, also with the Kinder Institute, wanted to highlight in figures released on what the policy accomplished.

"About 4600 lives will eventually be saved by doing two weeks of social distancing in Houston and Harris County from March 2nd to yesterday," said Fulton.

The projections are based on what epidemiologists drew from the spread, contagion and death rates from other countries. Without social distancing, he said, the contagion rate would be 40%.

"If we had no social distancing whatsoever, we might have seen upwards of 20,000 people perish and when you look at what happened in New York, with no distancing, that's not unreasonable because New York has already seen several thousand people pass away from the corona virus."

The question for Houston is what recovery will look like after the cases diminish.

"I don't know when that's going to be," Fulton said. "But I do know, keep doing what you're doing. Stick with it, and don't stop now," he said when asked about social distancing.

Follow Deborah Wrigley on Facebook and Twitter.

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