From the first recorded plague until today, pandemics have been risks that come with the rewards of advancing civilization. Some prominent examples:
- Plague of Athens 430 BCE caused by typhus or smallpox
- Plague of Justinian 541 CE in Byzantium – now Istanbul – caused by bacteria-carrying fleas
- The Black Death (bubonic plague) the most fatal pandemic recorded in human history, resulting in the deaths of up to 75–200 million people in Eurasia and North Africa, peaking in Europe from 1347 to 1351.
- Great Plague of London (bubonic plague) 1665
- Spanish Flu 1918 Polio
- Polio (1940s) AIDS 1980s Ebola, Swine Flu, SARS, ZIKA (all early 21st century)
- Covid-19: THE LATEST DISRUPTION
How fortunate to be living now rather than in the Middle Ages, for our science and technology has equipped us to battle back better than ever. Criticism of our government notwithstanding, America has responded to Covid-19 by:
- Recognizing the danger
- Providing P.P.E.
- Providing financial relief to workers and businesses
- Partnering with America’s leading drug companies to find vaccines
Neither America nor the world is ready to declare victory, but that will happen. And when it does, what will America look like? How will our lifestyle be different?
No one knows the answers, but we have been paying attention to what the best and brightest are saying. Here are some of the highlights:
- The answers are not going to be dictated to us. It will be America’s collective decisions that determine how we live our lives going forward, and the psychology of human nature will chart our course.
- Research done by neuro and cognitive scientists concludes that humans are “social animals” who value one another and seek social contact. Human psychological and social behavior evolve “slowly.”
- Compared with other pandemics, Covid-19 is much milder, certainly below a threshold that would trigger abrupt long-term changes in how we’ll live.
- Our economic recovery will be neither a “quick V” nor “prolonged U”. Our best guess is a “bowed V” on the recovery side.
And here is a sample of what lifestyle changes Covid-19 might have accelerated:
- More people working remotely or at home
- More education conducted online rather than on campus
- More use of “Big Data” and computers for surveillance
- More use of Social Media to bring people together
- More emphasis on “virtual” entertainment and socializing
How quickly and how extensively will be determined by us.
What might this mean for the price of oil? There has been much speculation (mostly heat, not light) but calmer heads think the following:
- All the hype about “negative prices” is simply a storage capacity problem that affects hedgers and speculators. If there’s no place to store the oil you contracted to buy, you can’t give it away. This is Econ 101 and applies to all commodities. (Milk producers are dumping it down the drain because they can’t store a perishable product.)
- A negative price is not going to exist at the wellhead or gas station. Yes, it will fall short-term to a level where the supply and demand curves intersect (no one can compute that point!), but it will not fall below the cost of the seller.
- Demand for oil has to ramp up when: economies come back from “sheltering-in-place,” people feel confident that Covid-19’s risk is no longer a threat, and worldwide economic growth resumes.
So, what’s the bottom line for Allied Resource Partners and you? We’ve already shared that in previous correspondences, but let’s recap:
- We have the operational and financial wherewithal to get beyond Covid-19. WE ARE A LONG-TERM PLAYER IN DOMESTIC INDEPENDENT O&G. YOU WON’T FIND ANOTHER COMPANY LIKE US WHO IS ABLE TO ARTICULATE TO PARTNERS THE WHY, WHAT, AND HOW OF WHAT WE ARE.
- We will operate our commercial wells so we make money – short and long-term – for our partners and ourselves.
- We will use current conditions to find new leasing opportunities and obtain win-win bargains for completing current projects.
Famed MIT economics professor Lester Thurow’s book Fortune Favors the Bold strikes a tone we agree with. We have thought through what we should do for ourselves and our partners, and will act accordingly, always mindful of what may change.
From reaching out to many partners, I find that you like how I and my team run the business. Thank you!
Best wishes, and stay healthy…
President, Allied Resource Partners