Economic Update: Another shocking week for the global economy

Published

22nd April 2020



It has been another shocking week for the global economy as the May contract price for West Texas Intermediate (WTI) oil in the United States fell below zero for the first time in history.

This gives us a good indication of the extent to which the global shutdown of activity is hammering the demand for oil. But, although demand is weak, producers aren’t shutting down their oil wells; either because it is costly to do this or because it could cause some long term damage to wells. Storing the excess supply is proving to be far more expensive than oil producers wish to pay and they are choosing to limit their losses by accepting a negative price, allowing the buyer to pay the cost of storage.

This collapse in the oil price in the United States has also had a knock-on effect in the North Sea and the price of Brent Crude has fallen to around $18 a barrel. Clearly the oil industry is under severe pressure at this price level and this will have a negative impact on Scotland’s economy. The Scottish Government’s latest ‘State of the Economy’ report forecasts that Scotland’s economic activity could shrink by one third whilst lockdown conditions are in place.

And around the world we are starting to see some concrete evidence of the full impact of shutting down all non-essential business activity. During the period from January to March, China’s economy shrank by almost 7% compared to the same period in 2019. This is the first time that China has experienced an actual fall in its economic activity since records began back in 1992, but policy makers are confident that China’s long term growth potential will not be reduced.

Unfortunately, longer term growth may be impeded in the United States where the number of people making jobless claims has continued its rapid move upwards, reaching a total of 22 million over the last 4 weeks. This high level of job loss could have a major impact on confidence and activity and could limit the possibility of a fast exit from the current economic downturn.

This is a fast-moving situation and the views, opinions, information and data contained in this newsletter may change as subsequent conditions vary. Although all information used in this publication has been compiled from sources believed to be reliable, it has not been independently verified. This newsletter is for information purposes only. 

This Economic Update document has been produced for Dundee & Angus Chamber of Commerce by Dr Shona Dobbie, Angus Economics 

THE FULL REPORT IS AVAILABLE HERE


Angus Economics

Angus Economics Limited

Angus Economics offers advice, workshops and training to help your business or social enterprise maximise its potential. Economic advice and training are available for the global, UK and Scottish economies, or on specific topics such as Brexit. Workshops and customised training are designed to give your enterprise a full understanding of costs, pricing strategies and opportunities for growth.

Dundee & Angus Chamber of Commerce

As the leading business membership organisation in Dundee & Angus and part of the worldwide long-established Chamber of Commerce brand, we help local businesses to connect, communicate and develop for business benefit.

Back to news