New Episode of Resources Radio: "Oil Markets in the Time of COVID-19, with Amy Myers Jaffe"

WASHINGTON, DC—Resources for the Future (RFF) today released a new installment of Resources Radio: “Oil Markets in the Time of COVID-19, with Amy Myers Jaffe.”

In this episode, host Kristin Hayes talks with Amy Myers Jaffe, director of the program on energy security and climate change at the Council on Foreign Relations. A leading expert on oil markets, Jaffe discusses how the coronavirus pandemic has rattled the market and sent oil prices plummeting. Unlike previous oil crises, where consumers could take advantage of low oil prices and spend more elsewhere in the economy, the coronavirus pandemic and its economic ramifications have left many Americans out of work and averse to travel. Fearing a prolonged economic crisis even if the coronavirus is contained, Jaffe contends that financial institutions should closely consider the long-term risks of low oil prices and plan to eventually address “systemic problems”—especially if companies struggle to make ends meet.

Listen here.

Notable quotes from the podcast:

• How coronavirus is exacerbating the oil price war: “Oil prices have gotten about as close as they can come to falling into free fall that I've seen in a long time. We are now in the $30 [per barrel] range, slowly moving to $20, and the more that the market hears that some other place is in lockdown, whether it's Seattle or New Rochelle … All these things just trigger more and more pessimism.” (5:08)
• Impact of price drop on American consumers: “One of the great things about oil prices, and this happened in 2014, 2015, is that in America ... it's like we all get a tax break at the pump. It stimulated the US economy by giving average Americans more money in their pocketbook, because I'm spending less money on fuel for my car, and if it's a winter month, I'm spending less on my heating oil bill, and so forth. That is not going to happen this time, because people's spending habits have completely changed … It's not going to be the same kind of stimulus to the economy that it normally is, because the economy is in a downward trajectory because people are staying in place.” (9:49)
• Systemic challenges if oil prices remain low: “How long the storm lasts is going to matter. If we're talking about two months, probably most companies can weather the storm, but there will be a handful of companies that have taken on too much debt and they may not ... But if this turns out to be a prolonged financial crisis … and the oil price stays low, then I think we're going to see some much more systemic problems, especially in the United States, that probably need to be addressed now—sooner rather than later.” (28:36)