America obtains 8% of its annual income from crude oil which invariably feeds sectors of the economy such as transportation, industrial, residential, energy, with an employment rate of ten million per annum in the sector.
Consequences of hike in oil prices have been all too familiar, what was unprepared for is an oil price crash.
It is no longer news, that Cushing Oklahoma is having a field day bottling all the oil at its disposal, buyers are paid for buying, for the first time putting a negative to the WTI- a $0 and a $1.10 later Monday evening.
As intense as the information available sounds, Americans are unsure what the crash of the oil price means for them.
Unemployment- In the wake of the global financial crisis of 2008, gold prices crashed, miners were laid off, salaries slashed to balance the inflow and outflow of resources. This generated world spread unemployment for many.
Experts fear the crash in oil prices will lead to loss of jobs for over 500,000 Americans. This means the grocery sellers, the barbers, the cobblers, the retailers will experience a 0.15% decline in sales. A foreseen ripple effect on cash down policies.
Pending inflation- oil price changes have a nonlinear effect on domestic prices, falling oil prices also weakened the overall foreign earnings of the African oil-producing countries, resulting in rising inflation rates given the demand for foreign offshore products; specifically, demand did not fall for food items the price of goods and services continued to rise as oil prices fell.
Food items are a major source of our lives, an increase in foods imported is eminent. The government is running an imminent loss in sales of crude oil, brace up on major inflation on prices of imported commodities.
Low cost of transportation- Flight rates, train charges, bus fares are speculated to maintain a 10% decrease from their usual cost, this means they buy petrol at low cost and this translates to cost fare. Before we celebrate, we realize that the Covid19 pandemic has reduced locomotion to 13%. This victory in itself has no bearing.
In all these, technology gains better fares in than the broader market, with the Nasdaq composite falling about 1 percent.
Companies like Amazon and Netflix have made a tremendous profit from stay-at-home orders as consumers’ pullback on spending elsewhere. Netflix, which will report its quarterly earnings results later this week, rose more than 3 percent on Monday.
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