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Much like the other industries affected by CoVID-19 where commodity and raw material processing has slowed down or stopped all together. Oil production came to a slowdown since air travel has been brought to its knees due to COVID constraints and fears. With a lower demand for air travel, along comes lower production in tandem with the similar prices that were apparent pre-COVID crisis. Since oil products could be considered perfectly inelastic, we would be paying the established retail price without changes in our economic behaviors. Price elasticity of demand refers to the degree at which the demand for a good changes as its price changes. With this in mind we can only forecast what will happen once travel starts to pick up, airline ticket prices might skyrocket temporarily and then settle down once fuel production picks up. But it’s too unsure to tell from now, since the overhaul of telecommunication being the norm for business meetings and “remote work” being the new work culture expectation for white-collar jobs; we can predict that things won’t exactly be 100% the same as it was before COVID. This new norm could negatively impact certain real estate properties targeted at office-based firms. As the need(demand) to occupy skyscraper floors decreases so will the value of the properties. Empty skyscrapers and commercial properties might be the new norm. Innovations in real estate offerings will be needed to maintain profitability in the long-run. The age of the start up business will more than likely be held online and leased office space will be seen more as a luxury reserved for well-established middle market and above corporations. A corona virus vaccine is on the horizon and seems to be the Hail Mary needed to save private industry from having to reorganize itself to perform at a new optimum. Corporations such as WeWork might have a profitable future if their price offerings are affordable enough for individuals who have remote positions but also desire an office space away from home. The potential industrial changes are endless but the hopes for the market to truly bounce back from the crisis are dwindling. The mark of a truly great economy is not determined by how much a nation is consuming but by how much it is producing. We can learn from history if we take a look at the piece of eight crash of the 1500’s. The piece of eight were Spanish minted silver coins and that were traded all over the world and became the first universal currency. Spain eventually minted and distributed enough coins to where they simply imported all their needs until they exhausted their money supply; leading to a crash in the currency and a ruined economy dependent on consumption.

Business travelers need to stay aware of what could happen to their ticket prices as the crisis unfolds and comes to a conclusion; and those that are transitioning to a permanent remote role must come to terms with the pros and cons of their new work lives. Commercial property owners worried about the new work culture should contact our team at Lee-Chandler Enterprises if they are concerned about increasing or maintaining the value of their investment.

 

https://sponsor.marketwatch.com/cme-group/the-return-of-travel-could-drive-oil-in-2021/?utm_medium=MarketWatch&utm_source=1118225_1_mw_frontpage_native_global

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