Coronavirus, oil pricing war driving unstable stock market - FOX34 Lubbock

Coronavirus, oil pricing war driving unstable stock market

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LUBBOCK, Texas -

The stock market is going through a big period of uncertainty, all stemming from coronavirus concerns.

"The bigger it gets, the bigger is going to be the economic slowdown, or even shutdown before it gets better," Michael Noel, a professor in the Department of Economics at Texas Tech, said. "So investors are taking their bets, and there's a great deal of risk that goes with that."

Demand for oil has been going down, Noel said. The Permian Basin has substantially increased supply in the U.S.

"In fact, a couple months ago, the United States became a net exporter of oil. That was unthinkable 20 years ago," Noel said. "So in fact, a lot of the activity that's happening in the Permian Basin is one of the reasons why the prices are low."

The demand problems are also causing lower prices, he said.

In addition, an oil price war broke out between Saudi Arabia and Russia, the world's second and third largest producers, sending oil prices into a historic collapse Monday.

Ray Perryman, president and CEO of The Perryman Group, said that is bad news for the region, and the key issue is how long the pricing war will go on.

"We've brought costs of producing oil down dramatically over the last five or six years, but we're not to the point where unsustained prices that we've been seeing the last couple days are going to be efficient to generate a lot of production," Perryman said.

However, Perryman said he believes it is all something the country and region can recover from quickly, because we entered it with strong fundamentals.

"In any aspect of your life, if you're uncertain about anything, what you tend to do is go to the sidelines, and that's what people are doing right now. When you go to the sidelines, that slows the economy down," Perryman said.

Noel also added the policy focus should be on stopping the spread of the coronavirus, because the longer it goes uncontained, the more damage will be done to the economy.

 

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