Author: admin

Submitted by South Front,

Saudi Arabia launched an all-out oil war offering unprecedented discounts and flooding the market in an attempt to capture a larger share and defeat other oil producers. This “scorched earth” approach caused the biggest oil price fall since the war in the Persian Gulf in 1991.

It all began on March 8 when Riyadh cut its April pricing for crude sales to Asia by $4-$6 a barrel and to the U.S. by $7 a barrel. The Kingdom expanded the discount for its flagship Arab Light crude to refiners in northwest Europe by $8 a barrel offering it at $10.25 a barrel under the Brent benchmark. In comparison, Russia’s Urals crude trades at a discount of about $2 a barrel under Brent. These actions became an attack at the ability of Russia to sell crude in Europe. The Russian ruble immediately plummeted almost 10% falling to its lowest level in more than four years.

Another side that suffered from Saudi actions is Iran. The Islamic country is facing a strong US sanctions pressure and often selling its oil via complex schemes and with notable discounts already.

Saudi Arabia is planning to increase its output above 10 million barrel per day. Currently, it pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day. According to OPEC and Saudi sources of The Wall Street Journal, Riyadh’s actions are part of an “aggressive campaign” against Moscow.

The formal pretext of this campaign became the inability of the OPEC+ (a meeting of representatives of member states of the Organization of the Petroleum Exporting Countries and non-OPEC members) to extend output agreements.

Saudi Arabia was seeking up to 1.5 million b/d in further oil production cuts, but this proposal was rejected by Russia. After the inability to reach the new OPEC+ deal, Saudi Arabia became the frist and only power that took aggressive actions on the market. However, it is hard to imagine that Saudi Arabia would go for such an escalation without at least an order or approval from Washington.

This came amid the detention of two senior members of the Saudi royal family – Prince Ahmed bin Abdulaziz, the younger brother of King Salman, and Mohammed bin Nayef, the king’s nephew – on March 7. This development took place just ahead of the Saudi offensive on the oil market, and was likely a tip of the ongoing undercover struggle between the pro-US and pro-national factions of the Saudi elites; and the pro-US bloc seems to have the upper hand in this conflict.

In this case, the real goal of the Saudi campaign is not only to secure larger share of the oil market and punish Moscow for its unwillingness to accept the proposed OPEC+ deal, but to deliver a powerful blow to Washington’s geopolitical opponents: Russia and Iran. Pro-Western and anti-government forces existing in both Russia and Iran would try to exploit this situation to destabilize the internal situation in the countries.

On the other hand, Saudi Arabia may soon find out that its actions have backfired. Such economic and geopolitical games amid the acute conflict with Iran, military setbacks in Yemen and the increasing regional standoff with the UAE could cost too much for the Kingdom itself.

If the oil prices fall any further and reach $20 per barrel, this will lead to unacceptable economic losses for Russia and Iran, and they could and will likely opt to use nonmarket tools of influencing the Saudi behavior. These options include the increasing support to Yemen’s Houthis with intelligence, weapons, money, and even military advisers, that will lead to the resumption of Houthi strikes on Saudi oil infrastructure.

On top of these, the Saudi leadership may suddenly find that the internal situation in the Kingdom is being worsened by large-scale protests rapidly turning into an open civil conflict.

Such a scenario is no secret for international financial analysts. On March 8, shares of Saudi state oil company Aramco slumped below their initial public offering (IPO) and closed 9.1% lower. On March 9, it continued the fall plunging another 10%.  There appears to be a lack of buyers. The risks are too obvious.

At the same time, the range of possible US actions in support of Saudi Arabia in the event of such an escalation is limited by the ongoing presidential campaign. Earlier, President Donald Trump demonstrated that a US military base could become a target of direct missile strike and Washington will not order a direct military action in response. Taking into account other examples of the US current approach towards non-Israeli allies, Riyadh should not expect any real support from its American allies in this standoff.

Well that re-escalated quickly…

A disappointing lack of detail -despite promises of unlimited spending – appears to have upset the market’s vibe from a day of panic-buying to very technical level of resistance.

Dow futures are now down 550 points…

And 10Y Treasury yields are down 12bps…

Is anyone really surprised?

Millions of Americans are working in the gig-economy could soon discover their side hustle jobs, such as being an Uber driver, Amazon delivery driver, and or completing odd tasks for Handyman, could come to a halt (temporarily) as the Covid-19 outbreak disrupts local economies across the country. 

We’ve noted in the past, more than 50 million Americans, or about 44% of all US workers, aged 18-64, are considered low-wage and low-skilled, have insurmountable debts (with limited savings), including auto, student, and credit card debts, are working in the gig-economy via side hustles and are most vulnerable to job losses. Many of these folks are also employed in the services sector, another corner of the job market that is high-risk of job loss if the virus outbreak starts forcing consumers to pull back on discretionary spending. 

The dark side of the gig economy could soon be realized as virus impacts are starting to mount, especially in West Coast cities. Millions of gig economy workers are low paid and lack proper health insurance. Some of these folks have barebone policies that require them to pay the first few thousand dollars of medical bills. 

The obvious risk to the gig economy so far is cities shutting down that forces a decline in the need for certain services, many of these folks don’t have a financial safety net nor health care for if they contract the virus. It’s simple: American workers aren’t prepared for a pandemic. 

“Tales of sky-high bills are buzzing in the media. A Miami man says he received a $3,270 bill for a voluntary coronavirus test; an American evacuated from the outbreak’s epicentre in Wuhan China received a $3,918 bill for mandatory quarantine in San Diego,” said the Financial Times. 

As cases and deaths soar in Seattle this week, the first views of the gig economy and services sector grinding to a halt is in downtown Seattle. The area has transformed into a ghost town, as the lack of tourists and people quarantined at home has created a demand shock for the local economy.

Seattle is rapidly approaching post apocalyptic ghost town levels. Pike Place and Westlake are the emptiest I’ve ever seen pic.twitter.com/XRPCTL5t3F

— Kate: my steam buns bring Lu Bu to the yard (@ArmyOfMeat) March 3, 2020

Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute, told CBS This Morning that further virus impacts on American cities could put a squeeze on household budgets and lead to a decline in discretionary spending. 

ECRI comments on CBS: If there are mass school closings many household budgets will feel a squeeze, hurting discretionary spending. https://t.co/VIscAiZW0Z

— Lakshman Achuthan (@businesscycle) March 5, 2020

CNBC explains that gig economy workers aren’t just some of the most exposed people to contract the virus, they also have no safety net as regular jobs do, such as sick days, health care, and covered expenses. CNBC’s Deirdre Bosa said some gig economy workers have already seen their business halved in the last several weeks due to virus fears.

Putting this all together, as cases and deaths soar in cities across the country, local economies could grind to a halt, and this could crash the gig economy and every millennial in it, who, frankly, many of which aren’t prepared for financial Armageddon unless they read ZeroHedge.

Authored by Catte Black via Off-Guardian.org,

We’ve had a couple of people take issue with us regarding the case fatality rate (CFR) of the 1918 Spanish Flu. Citing Wikipedia and the CDC we gave that rate as being between 10-20%. A couple of commenters, however, insisted the actual CFR was 2-3%, and this led us to look further.

What we found was quite interesting.

This is the pre-February 22 2020 opening paragraph of the ‘Mortality’ section on the Wiki page for the Spanish flu (our emphasis):

The global mortality rate from the 1918–1919 pandemic is not known, but an estimated 10% to 20% of those who were infected died (case-fatality ratio). About a third of the world population was infected, and 3% to 6% of the entire global population of over 1800 million[51] died.[2]

This is how the same paragraph reads now:

It is estimated that one third of the global population was infected,[2] and the World Health Organization estimates that 2–3% of those who were infected died (case-fatality ratio).

That’s quite a big change in a pretty short time.

What’s going on? Why is the CFR suddenly being downgraded so dramatically?

The WHO report they use as a source is not about the Spanish Flu, but simply mentions it in passing. It does indeed say 2-3% of those infected died, but gives no source for this, and also claims this represents 20-50 million people.

The trouble with that is the higher range of this estimate (50 million as 2% of total cases) gives a figure of 2.5 billion total cases. Which is higher than the entire population of the world at the time!(1.8 billion).

So something is clearly amiss.

Worse still, the WHO is the only source we have found so far that claims a death toll of 20 million. Most sources, such as the CDC (and see here), broadly agree that between 50 million and 100 million people died of the Spanish Flu (although one recent study wildly differs, see below). In order for 50-100 million deaths to be 2-3% of total cases there would have had to be 2.5 billion – 5 billion cases.

Obviously totally impossible.

Clearly there is something wrong with that newly revised figure of 2-3%. The only way to make it work is to also dramatically revise downward the number of deaths. And indeed there’s evidence of editors trying to do that on Wiki with someone citing a December 2018 study which used a controversial “new methodology” to establish a mortality figure of just 17 million. Given that this number has previously been estimated for India alone, this is remarkable revisionism.

Now, of course, there are debates about numbers of infections versus fatalities in every case study in epidemiology. It’s not an exact science. It’s fluid. Of course, estimates will vary and errors will be made and corrected. There’s more to be said about the inherent uncertainties in these cases, and we are currently talking to a respected virologist with the intention of covering the question further in future. Maybe the previous estimates of infection and fatality were too high. Maybe there is a rational case to be made for lowering them.

But is that what we are seeing on Wiki?

We all know Wikipedia is a micro-managed propaganda organ, so the fact its page on the Spanish Flu began a huge uptick of edits in December 2019, rising steadily until February 2020, and that the bulk of these edits seem concerned with – subtly and overtly – downgrading the severity of the 1918 pandemic has to be of interest.

Why the sudden decision to vastly downgrade the estimated CFR for the 1918 pandemic and source to a rather obscure WHO article that doesn’t even focus on that issue? And, more importantly, why does this extreme downgrade still exist on the page even when editors are pointing out the impossibility of the figures?

At least this new editorial policy by Wiki is well-timed for those looking to stoke fear, and unfortunate for those trying to bring reason to bear. It allows the media and others to cite the newly downgraded 2-3% CFR as evidence that COVID19 is as dangerous as, or more dangerous than, the Spanish Flu and will end up killing millions. That’s some nice clickbait right there.

Is it just human confusion? Maybe.

There is a report by a virologist, and cited by the CDC, that confirms the heretofore commonly accepted 500 million cases and 50-100 million deaths and adds this is a CFR of ‘over2.5%’. Which of course it is. It’s a CFR of 10-20%, as he would be the first to recognise. And 10-20% is over 2.5%.

Maybe his slightly ambiguous wording has led people astray? Maybe people consulting his work, as many do, including the Wiki editors, have taken ‘over 2.5%’ to mean just over, or even to mean exactly2.5%? Maybe that’s all this is.

Maybe.

But at any rate, the error, whatever it is, wherever it came from, isn’t ours. We didn’t make up the 10-20% CFR of Spanish Flu. It was the standard assessment until very, very recently. It still exists, though somewhat hidden now by ambiguous wording and confusion.

Several weeks after Japan started canceling sport and cultural events amid the broadening of the Covid-19 outbreak, Japanese Olympic organizers discussed on Tuesday the possibility the Games could be postponed.

Haruyuki Takahashi, one of the Tokyo 2020 organizing committee’s executive board members, said the Games could be delayed for one or two years. Takahashi said canceling the Games would have significant financial ramifications. 

“I don’t think the Games could be canceled. It’d be a delay,” Takahashi told The Wall Street Journal. “The International Olympic Committee (IOC) would be in trouble if there’s a cancellation. American TV rights alone provide them with a huge amount.”

Kazuhiro Tateda, an infectious disease expert of the Japanese government, said the fast-spreading virus could be sticking around a lot longer than many have anticipated, despite the upcoming warmer season. 

“Unlike the flu that disappears with warmer weather, the response to the new coronavirus, I think, will have to continue for half a year or a year,” Tateda told NHK on Tuesday.

For their part, the International Olympic Committee and local organizers say the games are on, but the clock is ticking…

“From what we know from numerous other mass-gathering events including sporting events, it is very easy to spread diseases worldwide from such events – from meningitis to Zika,” Dr. Ali Khan. an epidemiologist and dean of the College of Public Health at the University of Nebraska, told the AP.

“Besides welcoming athletes and spectators with their tiny microbes, there is and may be ongoing disease in Japan.”

To safeguard against any unexpected events, such as a continuation of the virus crisis that could extend into the July period when the Games start, the IOC can postpone the two-week event and float expenses through 2022. The IOC has, in the past, bought an insurance policy on the Games that will help cover financial losses associated with a delay or cancellation. 

The IOC’s annual reports show it paid almost $14.4 million in an insurance premium to protect against canceling the 2016 Rio Olympics and $12.8 million for a policy to cover the 2018 Winter Olympics in Pyeongchang, South Korea.

But, it is unclear if such a policy is in place for Tokyo as when IOC President Thomas Bach was asked last week after an executive board meeting if the insurance premium has risen to as much as $20 million for a Tokyo policy, he replied: “I don’t know, it wasn’t discussed at this EB.”

Although it would be shocking if they had not.

Not only would a cancellation of the Games would cause major disruptions to the international sporting calendar, it would have severe financial implications not just for the IOC, but for Japan and the world.

As AP reports, Tokyo is officially spending $12.6 billion to organize the Olympics, although a national government audit office says it’s at least twice that much. Andrew Zimbalist, a professor of economics at Smith College in Massachusetts, said construction cost for one venue in Japan was $1.43 billion. The local organizing committee budget of $5.6 billion is private money, with the rest coming from Japanese taxpayers. About $1 billion in the local operating budget is to come from ticket sales, which would be lost if the games go ahead without fans in empty stadiums.

“Some combination of the IOC, the broadcasters, and the insurers will lose big,” Victor Matheson, a sports economist at the College of the Holy Cross in Worcester, Massachusetts, said.

“That loss is coming out of someone’s pocket depending on how all of the contracts are written.”

Matheson adds that athletes are the most vulnerable from the financial shock:

“For athletes, their career length isn’t long and in many sports success in the Olympics is your one shot at a financial return.”

Aside from government officials coffers, athletes, coaches and sports officials, local organizers, and fans will be gutted too…

“I’ve heard things about possibly the Olympics being canceled, and I think that would stink,” J’den Cox, a two-time world champion wrestler and an Olympic bronze medalist, told AP News.

 “It would probably break everybody’s heart if that were to happen.”

The AP notes that 73% of IOC’s income is derived from selling broadcast rights. NBC made up at least half of those broadcast payments in the last Olympic cycle. Another 18% of the IOC income is from selling sponsorships. NBC parent company Comcast said its contract with the IOC and insurance would allow it to escape losses if cancelation was seen. However, NBC would lose hundreds of million dollars in ad money.

While there’s billions of dollars on the line, if it is with the IOC, Japan, broadcasters, sponsors, etc., there’s a strong possibility that at this point in time, if the virus continues to spread across the world, the Games would likely be delayed.

For now, an Irish bookmaker is showing odds leaning slightly toward the Olympics not going forward. Odds are 4-6 it will not open on July 24 in Tokyo, and even that it will.

Authored by Charles Hugh Smith via OfTwoMinds blog,

This is the upside of hyper-litigiousness: prevention is prioritized as the most effective means of limiting future liability.

Never mind prevention or vaccines; the big question is “who can we sue after this blows over to rake in millions of dollars?” Yes, this is pathetic, tragic, perverse and evil, but that’s reality in a hyper-litigious society like the U.S.

Many people are struck by the apparent over-reaction of Corporate America to the Covid-19 threat, but this is the only rational response in a hyper-litigious society: the number one priority in a hyper-litigious society is to limit liability. Everything–and yes, we mean everything–flows from this obsessive concern with limiting future liability.

Imagine the lawsuit brought by an employee of Corporate America who could have worked from home but was ordered by her employer to come to the workplace, and who was subsequently infected by the virus.

The corporation’s defense team would naturally claim there was no evidence the employee caught the virus at work, but alas, one employee in the building was confirmed as a carrier of Covid-19, so that defense won’t work: the employee could have been infected by this other employee in the workplace, and lacking any solid evidence to the contrary, it’s clear the company failed to protect its employees from exposure to the virus by forcing employees to work in a virus-infected work place when they could have worked from home.

By forcing an employee who could have worked from home to come to the office, the company is liable for damages. Multiply this case by thousands, and it’s easy to see why Corporate America has proactively moved so aggressively to a “work at home” policy and why corporate legal, HR and risk management teams are quickly issuing press releases and internal memos stressing all the measures the company is taking to lower the risks for employees and customers.

Future court cases will likely come down to basic tests, such as: did the corporation act promptly, prudently and in good faith? Did it pursue its preventative policies rigorously, or in a piecemeal, slapdash manner? Did the management quickly correct flawed execution, or did management fail to provide the necessary oversight, accountability and problem-solving to address the flawed execution of preventative measures? Did the company follow accepted industry protocols and standards? Did it make every available practical effort to reduce the risks to employees and customers?

If the measures are practical, coherent and applied consistently, this is a good thing. In prevention against a highly contagious virus, half-measures and window-dressing will not be effective: the execution of preventative measures must be 100%.

Thus it would be prudent to instruct all employees to wear masks, wash their hands often, conduct digital-online meetings, limit company gatherings, hire crews to regularly disinfect company facilities, etc. Companies that fail to impose and promote preventative policies and execute preventative measures uniformly will be opening Pandora’s Door to lawsuits that could stretch on for years.

This is the upside of hyper-litigiousness: prevention is prioritized as the most effective means of limiting future liability. The downside–extortionist lawsuits seeking quick out-of-court settlements as the cheaper way out of costly litigation–is an ugly reality of conducting commerce in America. But the upside–practical preventative policies that impose “social distancing” and high standards of personal hygiene and the regular disinfecting of common areas–could have a profound impact in lowering the spread of the virus.

*  *  *

My recent books:

Audiobook edition now available:
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Amid the broader travel, hotel, aviation, tourism and cruise line carnage, airlines are canceling domestic flights left and right while waiving cancellation fees. 

And as expected, ticket prices are plummeting given that as the International Air Transport Association has predicted demand for global air travel looks to decline in a first since 2009 over coronavirus fears, resulting in a potential loss of up to $113 billion in 2020 in revenue for the industry. Covid-19 is slashing airfares worldwide, as this brief list of examples suggests, culled from around the web: 

• New York to Miami: $51
• Chicago to San Francisco: $137
• New York to London: under $500 
• New York-Paris Return: $285
• In China: Shanghai to Chongqing for merely 29 yuan, or $4.10

Flyers have over the past week posted images of cabins nearly completely devoid of passengers. 

Reporting Live from Oslo: @RashaAlAqeedi and I have the entire flight to NYC to ourselves. #CoronavirusOutbreak pic.twitter.com/cfxsD8JEwb

— Eliza (@elizableu) March 7, 2020

The International Air Transport Association (IATA) predicts a devastating year for the industry:

IATA now sees 2020 global revenue losses for the passenger business of between $63 billion (in a scenario where COVID-19 is contained in current markets with over 100 cases as of 2 March) and $113 billion (in a scenario with a broader spreading of COVID-19). 

This after airline share prices have already fallen nearly 25% since the start of the outbreak.

A review of the price plunge in Forbes says the following:

The coronavirus is slashing airfares worldwide. Currently there are some great deals to be had for flying between the U.S and Europe. Tap in New York Paris return for example on Google Flights and it turns up startlingly low prices with leading airlines, American, United, Delta and Air France, for as low as $284 round trip, flying on April 5 to April 15. Go direct to Delta’s website and the picture is the same, with the lowest return fare for the same dates of $285.

Currently the deals site Airfarewatchdog.com reveals price drops of $26-$49 for a number of popular US city to city trips.

Authored by Irina Slav via OilPrice.com,

Most shale oil wells drilled in the United States are unprofitable at current oil prices, Rystad Energy has warned. The Norwegian consultancy said, as quoted by Bloomberg, that drilling new wells would be loss-making for more than 100 companies.

Just four shale drillers – Exxon, Chevron, Occidental, and Crownquest – can drill new wells at a profit at $31 per barrel of West Texas Intermediate.

The problem is the nature of shale oil wells: while quick to start production and expand it, they are also quick to run out of oil, so drillers need to keep drilling new ones to maintain production, which is what U.S. shale patch players have been doing for years.

However, this has affected investor returns, Bloomberg notes, and now it is affecting spending plans.

“Companies should not be burning capital to be keeping the production base at an unsustainable level,” Tom Loughrey from shale oil data company Friezo Loughrey Oil Well Partners LLC told Bloomberg.

“This is swing production — and that means you’re going to have to swing down.”

The situation is more positive for drilled but uncompleted wells, according to Rystad. The consultancy said yesterday that as much as 80 percent of DUCs in the U.S. shale patch have a breakeven price of less than $25 per barrel of WTI. Yet this is dangerously close to current prices.

“If nobody blinks in this supply war, prices may have to go this low in order to properly reduce production and get supply-demand back in balance,” Rystad’s head of shale research, Artem Abramov, said in the news release.

“This could turn out to be one of the greatest shocks ever faced by the oil industry, as coronavirus containment measures will add to the headache of producers fighting for market share. And OPEC has clearly stated that it won’t be coming to the rescue in the second quarter of 2020,” he also said. 

“Even the best operators will have to reduce activity, it’s almost impossible to be fully cash flow neutral this year with this price decline” he concluded.

Even before this, America’s shale producers already had a profitability problem. It just got a lot worse.

The Coachella Valley Music and Arts Festival in Indio, California was postponed on Tuesday afternoon as global cases of COVID-19 top 118,000. Organizers moved the April 10-12 and April 17-19 dates to October 9-11 and 16-18 on the hopes that the coronavirus scourge will be behind us by then.

“At the direction of the County of Riverside and local health authorities, we must sadly confirm the rescheduling of Coachella and Stagecoach due to COVID-19 concerns,” the organizers said in a statement. “All purchases for the April dates will be honored for the rescheduled October dates. Purchasers will be notified by Friday, March 13 on how to obtain a refund if they are unable to attend.”

The cancellation comes after over 18,000 people signed a Change.org petition calling for the event’s cancellation in order to “protect ourselves and California residents by do the right thing before it’s too late.”

Headliners include Rage Against The Machine, Frank Ocean and Travis Scott, who are reportedly all on board for the new date, according to TMZ. 

Looks like attendees will just have to wait for their annual dose of herpies.

At present there are 175 documented cases in California and 2 deaths according to the New York Times.