COVID-19: Oil & Stocks

Cheeeeep GAS

You have already noticed that the gas prices went down. Significantly! The first drop started on February 21st (Friday). Nothing critical, a slight fall down which had stopped on February 28th (Friday), exactly in a week. We are witnessing the Oil War – an epic battle between Russia and Saudi Arabia.

  • Why did the fall stop? 
  • Why did it rise back up? Briefly, but it id
  • Did someone regulate it? 
  • Was there events that caused the stall?
  • Is there an economic mechanism for oil price regulation?

Who controls the oil prices?
OPEC or the Organization of the Petroleum Exporting Countries was formed to negotiate matters concerning oil prices and production.

How does OPEC do it?
OPEC controls oil prices through its pricing-over-volume strategy. … Thus, when there is a glut of oil in the world, OPEC cuts back on its production quotas. When there is less oil, it increases oil prices to maintain stable levels of production.

Why do oil prices fall?
Factories have been idled and thousands of flights canceled around the world as the coronavirus outbreak. People work from home – they drive less. Shrinking demand for jet fuel, gasoline and diesel. And now – the travel ban between the United States and Europe. It’s a nightmare scenario for the oil market.

What cheap oil means?

  • You will benefit from lower oil prices and the resulting decline in gas prices at the pump, especially in the United States where retail markets react more directly to supply and demand.
  • If you work on oil somewhere in the plant in Texas, Louisiana, Oklahoma, New Mexico or North Dakota, you will most likely lose your job.

Warren Buffett talks oil price plunge

Stock are Down

Let’s see what is happening in market by industry:

Every industry has been negatively affected. Some more, some less. I circled the most affected industries. Let’s look closer:

Consumer Discretionary Sector -> Tesla is doing AMAZING

⬆️ Stocks that are on rise:
⬆️ Technology Sector displays growth:

Grocery Stores Industry shows great Performance. Costco stocks went up. People buy food in bulk! Folks also buy drugs, which is totally understandable and clearly observed from the stocks perspective Pharmacy Services & Retail Drugstore Industry Performance.

People play more video games: Gamestop Corp   (GME)

People are being asked to isolate themselves. This is against human nature, therefore people will find other “safe” ways to socialize. Because people won’t socialize as much, they won’t buy a lot of jewelry and accessories. Apparel industry will also see a dip. 

Shares of Signet Jewelers Are Down

Tiffany & Co. (TIF)

So what does the market tell us?
  1. People are scared
  2. When people are scared, they buy food and drugs. In bulk!
  3. Computer companies are on the rise. Particularly Networking and hardware industries
  4. People spend more time at home and play more video games
  5. When people don’t socialize as much, they worry less about the way they look
  6. People won’t go to the grocery stores as much. Online grocery shopping and delivery will grow
  7. People invest in Gold – one of the safest currencies.