For consumers, the oil price is already zero

Posted by: Paul Donovan

20 Apr 2020
  • The oil price has fallen to the lowest level since 1999. Normally, this is a benefit for oil consumers. However, many consumers face an effective oil price of zero because they are in lockdown and not using oil. The fall in oil demand, not the price of oil, is cutting their cost of living. Profit margins of corporate oil users may benefit.
  • Some US companies got a tax break on Sunday, as US President Trump's trade taxes were delayed (not for US consumers of steel and aluminium, who must still pay). The stimulus is small, but Treasury Secretary Mnuchin did admit that the burden of the trade taxes falls on US companies.
  • The ECB is reportedly having discussions about setting up a Eurozone bad bank to take on non-performing loans left over from the last crisis. The aim is to ease lending in phase two – the economic bounce back. Italian Prime Minister Conte reiterated the call for common debt issuance.
  • Germany reopens smaller stores today. The question is whether people who have been in lockdown and forced to save money will rush to spend it now that they can? Anecdotal evidence and things like Google location data may give some hints.

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