Coronavirus to impact oil prices, Alberta tourism

The most important aspect of the ongoing coronavirus outbreak is the human factor—from lives lost and grieving families to the efforts of those trying to contain its spread and find a vaccine.

Nonetheless, there are also economic implications, ATB Financial’s Economics and Research team states.

With the outbreak’s epicenter in China, the world’s second largest economy after the United States has been hampered by voluntary and involuntary restrictions on the movement of people. This has led to factory shutdowns and reduced demand as people stay home rather than go out to eat, shop or travel to other places.

The slowdown in China has ripple effects around the globe. One of the most important to Alberta is the impact on oil prices. While the consumption of oil is higher than it has ever been in human history, supply is also higher than ever. As a result, even a small drop in demand can send prices tumbling. This has been the case so far in 2020 with the expectation of reduced demand due to the virus helping to push the price of the West Texas Intermediate crude oil benchmark down from over over $US 60 per barrel to under $50.

As a major importer of goods, the slowdown in China will also have a general dampening effect on global trade. A potentially larger concern is China’s role in global supply chains. From mobile phones to auto parts, Chinese manufacturers supply a wide range of key components that might not be available if key factories remain shuddered.

Tourism is expected to suffer as travel is reduced for practical reasons and out of fear of contracting the virus. Alberta will likely see a fall off in international visitors, ATB Financial’s Economics and Research team said. However, while it may not fully counter the drop in international revenue, the tourist sector may see some lift from local spending and from Americans who elect to come here rather than go further afield.

On both the human and economic fronts, the hope is that the outbreak will be contained. If this is the case, the negative economic effects, while significant, should dissipate relatively quickly. If the outbreak worsens, the economic pain will both increase and last longer.

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