A global pandemic’s ancillary risks

| April 3, 2020 | 0 Comments
(Photo: ktsimage)

(Photo: ktsimage)

The virus that causes COVID-19 has spread like wildfire across the globe. The economic impact is already dramatic: Historic declines in stock markets and major impacts for industries, education and local health districts. Among the hardest hit are airlines and energy companies.
“The global coronavirus outbreak has been and will continue to be a massive shock for the airline industry due to the increasing number of travel restrictions and economic setbacks in key markets,” writes Stratfor Worldview. “As the epicentre of the outbreak, China’s airline sector has so far been hit hardest, likely spurring greater consolidation of the country’s state-backed airline carriers as they absorb beleaguered private players. In Europe, the outbreak will accelerate the ongoing process of consolidating the airline sector as well, as some companies merge while other weaker players disappear.”
Meantime, the energy industry, especially oil and gas, is reeling from the decision by Saudi Arabia to offer aggressive discounting on its oil exports and sharply increasing output in April in the wake of its failure to agree with Russia on a path forward for OPEC+ production restraint. Russia argued that with so many unknowns around the COVID-19 impacts on demand, it didn’t make sense to cut production.
But the price dive will hurt U.S. shale producers, notes Stratfor Worldview.
“U.S. shale production would have felt a major impact before the end of 2020 just from the lack of further production restraint, but would have bottomed out at a higher price, perhaps $40 per barrel. The difference between $35 and $45 as an average crude oil price is huge in terms of fiscal impact on producers, but is not nearly as significant in terms of the volume loss that will be seen later this year from U.S. producers.”
Greg Priddy, Stratfor’s director, global energy and Middle East, adds: “Russian Deputy Energy Minister [Pavel] Sorokin’s comments make sense, a very coherent view of the market share argument and short-term pain for long-term gain.”
Businesses and services across the board are making tough decisions to help lessen the risk of an uncontrollable coronavirus spread. So are schools — from colleges and universities to K-12 and even pre-schools. As more schools close, the economic impact is likely to be significant, and not just for parents paying tens of thousands of dollars in college tuition and board for a truncated spring semester and mandatory long-distance learning. Consider small businesses such as day care centres — which can operate on thin margins and whose staff are often hourly workers. There are school lunch caterers that have no students to serve. City bus services, which serve many urban students, will see fewer passengers. The impacts will resonate across the economy.
Some primary and secondary schools are asking students to log on to learn. But as Stratfor’s Ryan Bohl writes, “[E]ven in places with the technology, particularly in bigger school districts, a quick rollout and implementation of e-learning tech will come with considerable training hurdles for both staff and students.”
Schools are already advising parents — many of whom are also being asked to work from home — to monitor and manage student learning. Distance learning comes with its own risks.
“[T]his will only increase the burden on working-class families by forcing them to stay home and become informal teachers while still maintaining shift hours or multiple jobs,” Bohl writes. “This will, in turn, siphon their time and energy from them, affecting their work productivity and reducing their incentive to spend.”
Moreover, schooling from home and working from home — while lessening the likelihood of an out-of-control virus — can carry other significant risks. Students working from home will typically log in to their school accounts to access homework and turn in assignments. (In the Austin, Texas, school district, it’s Google Classroom). Students should connect, obtain their assignments and disconnect. Students should refrain from browsing internet sites while logged in to their school student accounts. Complete the assignment, and log back into the school account using a new browser window to submit assignments.
One of the biggest risks that arises when working at home during an unprecedented global predicament is stolen data. As Stratfor’s vice-president of tactical analysis, Scott Stewart, points out, “If possible, avoid using public Wi-Fi to conduct any business — personal or professional. And when working from home, you can lessen the risk of having data stolen by using VPNs and cellular data. We recommend that employees be educated about the wide array of phishing schemes seeking to capitalize on COVID-19,” Stewart writes. “Employees should also be advised about business email compromise, sometimes referred to as ‘CEO scams’ or ‘president scams,’ a growing risk as more business is conducted remotely and over email.”

https://marcom.stratfor.com/horizons/ancillary-risks-global-pandemic is republished with the permission of Stratfor, a leading global geopolitical intelligence and advisory firm.

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https://marcom.stratfor.com/horizons/ancillary-risks-global-pandemic is republished with the permission of Stratfor, a leading global geopolitical intelligence and advisory firm.   

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