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Could Low Oil Prices Spark A New War In The Middle East –



Could Low Oil Prices Spark A New War In The Middle East? |

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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    It may seem that the worst-case scenario has already come to pass, as United States crude prices plunged far below zero on Monday, with the West Texas Intermediate crude benchmark closing out the day at negative $37.63 per barrel and the international Brent Crude benchmark hitting an 18-year low. While oil prices have since recovered considerably, however, many industry experts say that it’s more than likely that we haven’t seen the worst of it yet. The problems that drove oil prices so low to begin with still persist. It all began with a drop in oil demand as the novel coronavirus epidemic turned into a pandemic as it spread around the globe, shutting down major economic sectors and supply chains. When Russia and Saudi Arabia, the leading members of OPEC+, met to strategize, however, the talks turned sour and quickly devolved into an all-out oil price war and an oil glut of a whopping 10 million barrels of oversupply per day. When the oversupply threatened to exceed available storage, owning oil became a liability, and oil prices plunged below zero in the U.S. 

    Can Brent Crude oil follow WTI into negative territory?” Bloomberg asked its readers this week. Answer: “You Bet.” If the international oil markets follow the United States’ lead, it’s going to lead to a full blown existential crisis for the energy industry. Now that we’re seeing what happens after oil goes negative play out in real-time, the next question is: what happens if the oil industry doesn’t recover?

    “The collapse of the oil market,” speculates Slate’s Fred Kaplan, “might unleash something more serious and enduring in certain regions of the world in the coming months: socioeconomic breakdowns, political disruptions, and shifts in the balance of power.” The ramifications will be greatest for the nations who rely most heavily on oil for their gross domestic product, with a particularly grim forecast for the oil autocrats leading petro-states such as Saudi Arabia, Russia, Azerbaijan, Iran, Iraq, Qatar, and Kuwait, to name just a few, who will struggle to keep their power if oil loses its influence. 

    Related: Rig Count Collapse Continues Despite Jump In Oil Prices

    60 percent of Saudi Arabia’s GDP comes directly from oil revenues. Oil sector earnings account for over 60 percent of the government’s total budget, and almost 75 percent of national exports. Incredibly, Iran, Iraq, Qatar, and Kuwait are even more dependent. the dependency is greater still. Only slightly less dependent, one-third of Russia’s GDP, half of the budget, and two-thirds of the nation’s exports come directly from oil revenues. “By contrast, oil accounts for just 8 percent of U.S. GDP — a significant share, with bruising effect in certain states, especially Texas, but not the looming force that it is in many other countries,” writes Kaplan. 

    This is all going to lead to major instability and geopolitical tension, especially in the Middle East. “With coronavirus lockdowns causing a drastic reduction in demand for oil, many of these countries won’t be able to pay their bills, bribe their military officers, or provide basic social services to their populations.” 

    While Russia and Saudi Arabia both have significant sovereign wealth funds (“Russia’s amounts to $150 billion, Saudi Arabia’s to more than twice that sum”) to help them get through a short-term oil price crisis, a prolonged downturn of the severity we’re currently experiencing could lead to serious fallout and even conflict. 

    And then there are the countries that have no economic cushion to fall back on at all: Venezuela, which is already suffering from one of the worst economic crises in modern history, is almost 100 percent dependent on oil for the little money they do take in. Ecuador is in only a slightly better position, and bracing for their economy to contract by a whopping 4 percent from a loss of oil revenues alone. 

    These countries will have to diversify their economies no matter what. The demise of the oil industry is an inevitability as the world moves away from greenhouse-gas intensive fossil fuels and toward renewable energy alternatives, and even Saudi Aramco has admitted that they expect peak oil by mid-century. They just didn’t expect it overnight. Petro-states will be a thing of the past in a matter of decades–the question is, will they go out with a bang or a whimper? Hopefully, for the sake of global security and the millions of citizens depending on petro-states for their livelihoods, it will be the latter. 

    By Haley Zaremba for

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      Canada unexpectedly adds 289600 jobs on gradual reopening –



      Canada’s labour market unexpectedly strengthened after two-straight months of record losses as the country gradually reopens from COVID-19 related restrictions.

      Employment rose by 289,600 in May, Statistics Canada said Friday in Ottawa, surprising economists who had been anticipating more losses last month. The gains were across most industries and provinces, though largely driven by higher employment in Quebec, the province hardest hit by the pandemic.

      The numbers echo recent high-frequency data, which had signaled a recovery is underway, with job postings increasing and more Canadians reporting an increase in work at the end of May. They will be a relief to policy makers who had been scrambling to inject hundreds of billions in cash into the economy to keep it afloat. Still, just under 5 million remain without work or substantially reduced hours with the jobless rate at postwar records.

      “The surprisingly positive readings on employment paint a more optimistic picture of the early part of the recovery, but there’s still a long road back,” Royce Mendes, an economist at Canadian Imperial Bank of Commerce, said in a research report. “The increase in May only represents 10 per cent of the COVID-19-related job losses and absences that occurred over the prior two months.”

      Unprecedented Losses

      The pick up in May follows an unprecedented loss of about 3 million jobs in March and April. More than 2 million employed Canadians continue to experience much lower hours worked than pre-crsisis.

      The unemployment rate ticked up to 13.7% in May, from 13 per cent in April, as people returned to the labor force. Economists in a Bloomberg survey expected a loss of 500,000 jobs, with the unemployment rate rising to 15 per cent.

      Canada’s currency extended gains on the result, appreciating 0.7 per cent to $1.3406 against its U.S. counterpart at 9:46 a.m. Toronto time. Yields on two-year government bonds rose 2 basis points to 0.35 per cent.

      The better-than-expected report suggests the governments programs to cushion the blow to the labor market are working. By mid-May, 179,000 businesses had applied for the government’s 75 per cent wage subsidy program. The pace of applications to Canada’s emergency income benefit program has also decelerated in recent weeks, suggesting the worst of the layoffs and job losses is over.

      In addition to the employment pick up, Statistics Canada said the number of people who worked less than half their usual hours dropped by 292,000. That means the number of Canadians who have either lost their job or worked substantially fewer hours has fallen to just under 5 million, from about 5.5 million in April. Hours worked rose 6.3 per cent in May from the prior month but were still 23 per cent below February’s levels .

      Cautious Reopening

      The surprise jump reflects the cautious reopening of the economy across provinces. By the time the employment survey was taken from May 10 to May 16, some provinces including B.C., Saskatchewan and Quebec allowed some non-essential businesses to reopen.

      Quebec accounted for nearly 80% of May’s gains, the statistics agency said. In contrast, Ontario -– where the economy remained largely shut until May 19 –- saw more losses.

      In the early days of the reopening, employment rebounded more strongly among goods producers, the data show. The goods-producing sector added 165,000 jobs versus 125,000 in services. Lower-wage jobs also rebounded more, particularly in retail trade, accommodation and food services.

      Women Lagging

      Demographically, male employment increased more than twice as fast as that for women, consistent with the more rapid increase in the goods-producing industry. Women were among the earliest victims of the Covid-19 related job losses in March and the latest data suggest they are slower to recover as well.

      “The kinds of jobs that reopened earlier tend to be more male dominated in employment and also that more women don’t know how to get back to work because they don’t know what to do with their kids because schools aren’t open,” said Armine Yalnizyan, a research fellow at the Atkinson Foundation.

      Women with at least one child under age 6 showed a slower return to work than women with older children. Statistics Canada said it will continue to monitor labor market outcomes for men and women with children in the months to come.

      Youth are still suffering heavily from the Covid-19 economic shutdown. While employment recovered by 30,000 for those aged 15-24, the cumulative job losses for this age cohort are still a whopping 843,000 from February to May.

      –With assistance from Erik Hertzberg.

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      London region sees 28400 jobs lost to COVID-19 – CTV News London



      LONDON, ONT. —
      The unemployment rate in London increased dramatically in May, according to Statistics Canada.

      London’s jobless rate climbed to 11.7 per cent in May, compared to 8.9 per cent in April.

      It’s the lowest number of people working in London since 2003, when there were over 80,000 fewer people living in the area.

      Based on a three-month rolling average, London-St. Thomas has lost 28,400 people from its labour force – and that’s just since February.

      That figure includes Shannon Rumble, “Since the beginning when everything shut down, I haven’t been to work at all.”

      Temporarily laid off from her job as a line cook, federal CERB payments are helping, but Rumble needs things to get back to normal soon.

      “I’m a single mom, so (my daughter) can’t go to day care. My parents are helping out, but I can’t go to work if she can’t go to school or day care,” she explains.

      “Its not just numbers, it’s people,” London Mayor Ed Holder isn’t sugar coating the situation, “It impacts people on a very personal level and if you are trying to make a mortgage (payment), or make sure your kids are alright, I get that.”

      From the perspective of businesses, Holder says large employers who are part of his COVID-19 economic task force are balancing an urgent desire to get staff back to work, with the need to keep them safe from COVID-19.

      “We will be doing business, we may just be doing it differently,” he says.

      Holder predicts a moderate, consistent comeback as businesses reopen, “I am optimistic that, while I don’t think it’s a quick recovery, I think it will be steady.”

      On a national level, Statistics Canada reported a record high unemployment rate even as the economy added 289,600 jobs in May, with businesses reopening amid easing public health restrictions.

      The national unemployment rate rose to 13.7 per cent, topping the previous high of 13.1 per cent set in December 1982.

      The increase in the unemployment rate came as more people started looking for work.

      The increase in the number of jobs come after three million were lost over March and April.

      The average estimate from economists is for the loss of 500,000 jobs in May and for the unemployment rate to rise to 15.0 per cent, according to financial markets data firm Refinitiv.

      – With files from CTV’s Melanie Borrelli and The Canadian Press.

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      What do the new CMHC rules mean for homebuyers? –



      Getting mortgage default insurance is about to get harder after Canada’s federal housing agency announced stricter lending standards on Thursday.

      The Canada Mortgage and Housing Corp. (CMHC) says it will no longer allow homebuyers to use borrowed funds for their down payment, will require a higher credit score from at least one borrower and will lower the threshold for how much debt applicants can carry compared to their income.

      The changes, which come into effect July 1, will reduce the purchasing power of homebuyers who opt for CMHC insurance and likely leave insured mortgage applicants in pricey markets with fewer options, according to mortgage brokers.

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      CMHC’s new debt-ratio policy will lower homebuyers’ purchasing power by up to 11 per cent, according to Robert McLister, founder of rates comparisons site

      For example, someone making $60,000 a year with a five per cent down payment and no pre-existing debt would be able to afford a home with a maximum home price that is roughly 11 per cent lower than what they would have been able to buy before the new rules, according to McLister’s calculations.

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      Economists say the measures could discourage some prospective homebuyers from entering the market.

      CMHC said it will require a credit score of at least 680, up from the current minimum of 600. It will also lower the maximum amount of debt applicants are allowed to carry compared to their income.

      To measure the latter, lenders use two key metrics: the gross debt service ratio (GDS), or the share of income used to cover the mortgage and other housing costs like property taxes, and the total debt service ratio (TDS), the share of income used to cover housing costs plus the cost of servicing other debts.

      CMHC is lowering the maximum GDS from 39 per cent to 35 per cent and the maximum TDS from 44 per cent to 42 per cent.

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      Changes to the GDS threshold and the credit score minimum will have the greatest impact on affordability, said James Laird, co-founder of financial products comparisons site and president of mortgage brokerage CanWise Financial, in a statement via email.

      Banning the use of borrowed funds to finance down payments will likely have a more marginal effect, as most Canadians rely on savings, investments and financial help from family for down payments, Laird added.

      Mortgage insurance, which protects lenders from the risk of borrowers defaulting on their payments, is mandatory in Canada for loans with a down payment of less than 20 per cent.

      Mortgage default insurance is available from CMHC as well as private companies such as Genworth MI Canada Inc. and Canada Guaranty Mortgage Insurance Co.

      While the new CMHC rules do not apply to Canada’s private mortgage insurers, they could adopt the new policy on a voluntary basis.

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      Private mortgage insurance providers could become “the only games left in town” for homebuyers in expensive markets like Toronto and Vancouver, where borrowers generally have higher debt ratios, McLister noted.⁠

      McLister is critical of CMHC’s decision to tighten the rules at a time when the economy is already reeling from the impact of the COVID-19 public health restrictions.

      “Normally, you don’t rock the boat when you’re already taking on water,” McLister wrote in a blog post shortly after the policy announcement. “But that’s what CMHC has done,” he added.

      Canada’s housing agency has said it’s concerned that already high household debt levels will soar in the aftermath of the COVID-19 crisis, increasing the risk that overstretched homeowners won’t be able to keep up with their mortgage payments.

      The new rules “will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth,” said CMHC head Evan Siddall in a statement.

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      — With files from the Canadian Press

      © 2020 Global News, a division of Corus Entertainment Inc.

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