Do Not Panic Crashing Oil Prices Are Good For The World Corona Virus Will Go Away

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First of all the corona virus seems to be tapering off in China - where it all began. The Chinese are closing down that pretty huge makeshift hospital which they had built in Wuhan.

And President Xi also made an unannounced visit to Wuhan. I assume the president would not visit Wuhan unless the situation has improved substantially. 


Let us hope that the worst is over in China.
In other parts of the world leaders and governments are taking drastic steps to contain the virus. Italy is in lockdown mode. The Pope cancelled his Sunday open air mass and opted for an online Sunday mass instead. That is very common sensical of the Pope.
Folks here is some advice :
1. STOP SHAKING HANDS AND BERSALAMJust say hi or do the Indian style 'sembah'
2. Wash your hands as often as you can. 
3. Rinse or gargle your mouths many times in a day.
4. Do not touch your face with your hands. Or at least wash your hands before touching your face.F and B workers DO NOT TOUCH your faces.
5. Avoid closed environments with central airconditioning
6. Avoid crowds and congregations
7. Wear those masks
8. Take high doses of Vitamin C.  Its good for you anyway.
The crashing oil prices are good for the entire world. 
The panic is hitting the oil and gas companies, those folks who are involved in the oil and gas business. There will be some bullet biting among these folks. A few may get hit by bullets and never recover. 
Banks that are exposed with lending to the oil and gas sector will also get hit by non performing loans etc. 
This part of the panic is purely financial - the stock market investors may get their fingers burnt. These are the headlines we are reading. 
However lower energy prices will be very good to stimulate the world economy. Everything runs on fuel oils (petrol, diesel, bunker oil, gas, kerosene jet fuel etc). All over the world transportation and energy costs will go down.
Is this a real paradigm shift in energy prices?Is it a direct effect of the corona virus?Is it just because of over pumping oil by Russia and Saudi Arabia?A combination of factors?We will know soon enough.
More importantly how long will it last? 
If these low prices presist for a few months (say six months) then many oil economies (like Malaysia) and oil and gas companies all around the world are going to get burnt.  
But there should be a balancing factor or compensating factor (the lower energy costs for the world economy) which can perhaps kick start more growth in the world economy. There will be some losers but I think there will be more winners.
Lower gas prices are a very good thing. 
I have been saying this for years now - oil is a sunset industry. 
Here is my prediction. While the selling price of oil hits a ceiling all too frequently now, the costs of producing a barrel of oil keep increasing. This means the profit margins will get squeezed especially for high cost producers like Malaysia. (I have heard that Malaysia's cost to produce a barrel of oil from the deep sea wells is closer to US$40 per barrel). 
The only oil and gas players who will survive will be those who have the volumes. Volumes in production and sales which can further average out their cost per barrel.
I see Petronas will face very dark clouds on the horizon. 
And the government too which relies plenty on tax and dividend revenues from Petronas.
Posted by Syed Akbar Ali 

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