Speed of response seems to be a major factor in limiting the spread of Coronavirus

I recall back at the time of the Athens Olympics, Sacha Baron Cohen in his assumed TV persona of Ali G, asked the question “Why did they give it to a rubbish country like Greece?”    Well lots of people, especially those who have visited Greece, would disagree with his characterization, but few I imagine, would hold up Greece as a model of good governance, especially after the financial crisis of 2015 and the revelations of the way Greece had been squandering the easy loans it had been receiving from the EU and elsewhere. 

But it seems that when it comes to managing COVID-19, Greece has done much better than most countries.   They have had the advantage of not being, like Italy, one of the first countries where it struck, but they seemed to have learned from the experience of Italy and Spain. 

Before discussing what Greece did right, and US, UK and others did wrong, let’s look at the performance.  The first graph shows cumulative numbers of deaths normalized by population (deaths per million) on a logarithmic scale, against days since start (defined as when one death per million occurred).  While the US has had 86 deaths per million, Greece has only had 9.5 per million.  The UK has had a disturbing 194.1 deaths per million.  So the normalized death figures for US and UK are roughly ten and twenty times those for Greece.  

The number of deaths for the UK is probably a huge underestimate, because the UK is only recording hospital deaths.  In Canada close to half of COVID deaths have been linked to long-term care facilities for the elderly, most dying in the care homes themselves. There is no reason to think that things would be substantially different in the UK, so in fact the actual number of UK deaths could be closer to 300 or 400 per million, which makes its fatality rate among the highest in the world, along with Spain and Italy.   

A similar picture prevails if one looks at number of cases rather than deaths.  The second graph shows these numbers.  Greece has 204.4 cases per million, USA 1931.2  cases per million and UK 1497. 4 cases per million.  So again USA and UK have substantially more cases than Greece.

What is the reason behind these huge discrepancies?   This article by Eric Reguly goes into the steps that Greece took which others didn’t. 

https://www.theglobeandmail.com/world/article-greece-learned-from-italys-and-spains-mistakes-and-used-rapid/

It seems that the main thing is that they acted very quickly to isolate and shut down the spread. It was fortunate in that it had a new government with a strong mandate, and so was able to make tough decisions, without much dissent. It also was able to learn from the experiences of Italy and Spain.  For example Reguly informs that 

“All Greek schools were closed within 13 days of the first positive test. Italy did not shut its schools until 33 days after its first positive; Spain took 43 days. Greece’s schools were closed on the day the country reported its first coronavirus fatality. Italy waited 11 days and Spain 30 days. Non-essential shops were closed in Greece within four days of the first fatality. Italy waited 18 days and Spain 30 days.”

Compare this with what happened in US and UK.  In spite of Donald Trump trying to blame everybody but himself, especially the WHO, he must be held responsible for much of the slow response in his country.  

A full month after the WHO declared “a public health emergency of international concern” (on January 30) Donald Trump told a rally of his supporters (on Feb. 28) that "Thirty five thousand people on average die each year from the flu. Did anyone know that?  Thirty five thousand. That's a lot of people. And so far, we have lost nobody to coronavirus in the United States."

"Now, the Democrats are politicising the coronavirus… this is their new hoax."  Finally on March 13, the US declared a national emergency.  

The first case of COVID identified in the US was on January 19 in Snohomish County in Washington State.  So the US wasted six weeks.  

In contrast to the US as a whole, one state especially stands out for taking rapid action and keeping the outbreak under control. This is California, where Governor Newsom declared a state of emergency on March 4 and issued an order for Californians to stay indoors on March 19.   California now has one of the lowest infection rates per capita of all US states (see graph). 

The UK offers another example of delay causing a severe outbreak.  It was very slow off of the mark, at first adopting a policy of advocating protection of the frail and elderly while letting younger fit people get the disease to build up herd immunity. While proposed by the Chief Government Scientist and Medical Officer, this policy always seemed to me like an absurdity - basically saying we’ll let people get COVID this year to prevent them from getting it next year.  Perhaps with poetic justice both Boris Johnson and the Chief Scientist ended up contracting the disease.  

Boris Johnson, like Trump, adopted a very blasé attitude to the disease, going around shaking hands with people long after the WHO had warned against close contact.  The UK Government’s handling if the crisis represents a complete policy failure, following from which many people have died.  

To those with a mathematical background, it should come as no surprise that early action can be very effective.  If something is growing exponentially, reducing the initial state, by say fifty percent, will have the effect of reducing the state by fifty percent at every time point thereafter.  Even as growth from exponential slows, the scaling still applies.  

So it seems the arrogance and assumed superiority of Britain and the USA, or at least of their leaders, has led to disasters, which could have been, if not completely avoided, then greatly ameliorated. 

Will these leaders be held to account?  I would like to think so.   But Trump, with his optimistic if dangerous message seems to have maintained support at least of his base.  And by contracting the virus himself, Johnson may have earned the sympathy of many voters, notwithstanding the fact that to some extent his sickness was of his own doing. 

PS.  Since first posting this I saw the following, by Britta and Nicolas Jewell of Imperial College London and London School of Hygiene and Tropical Medicine, which reinforces the importance of early intervention:  

The recent divergence of epidemics in Kentucky and Tennessee shows that even a few days’ difference in action can have a big effect. Kentucky’s social distancing measure was issued March 26; Tennessee waited until the last minute of March 31. As Kentucky moved to full statewide measures in reducing infection growth, Tennessee was usually less than a week behind. But as of Friday, the result was stark: Kentucky had 1,693 confirmed cases (379 per million population); Tennessee had 4,862 (712 per million).

If the shale industry goes down, who will it take with it?

The BBC on Sunday reported that ‘Opec producers and allies have agreed a record oil deal that will slash global output by about 10%’.  In March the price had dropped dramatically because of a perfect storm which saw a headlong drop in demand caused by the Coronavirus coupled with a large increase in supply due to Saudi Arabia precipitously increasing production after it failed to reach an agreement on production quotas with Russia.  It was yet another abject failure by the young hothead who seems to call the shots in Saudi Arabia, Prince Mohammed bin Salman.

Whether or not this agreed cut will hold, and if it does whether it will restore the price of oil to any thing like what it was at the start of the year, remains to be seen.  I somehow doubt it will.  However even if it does I doubt if it will rescue the shale oil industry in the United States, from what looks like a very shaky future.  

Hydraulic fracturing, or fracking as it is more widely known, was first proved to be commercially viable in 1997. It works by pumping liquid at high pressure into horizontally distributed oil deposits in shale rock formations, below the surface.  It has been used in producing oil and gas on a large scale for ten to fifteen years.  But in that time it has turned the industry on its head.  The USA used to worry about its increasing dependence on oil imports, but in that ten year span it has not only become self-sufficient and more, it has become the world’s largest oil producer, eclipsing even Saudi Arabia.  

Perhaps this energy independence has been one of the causes of increased American self-assertion on the world stage.  No longer reliant on Middle-Eastern oil, it no doubt feels it can afford policies, which lead to de-stabilization of the region, such as its support of jihadi rebels and civil war in Syria and the extreme tilt towards Israel, which has occurred during Donald Trump’s presidency.  In fact instability in the energy ‘breadbasket’ of the Middle East, actually helps American shale producers by keeping oil prices high.  It could be argued that this is one of the reasons for Trump’s antagonistic policies towards Iran - to keep Iranian oil off of the market.  

Something not mentioned often in the triumphal boosting of the newfound American energy supremacy, is the fact that the industry can only be economically viable with energy prices suitably high.  The break-even price for shale oil is put between $48 and $54 (USD) a barrel. Last week the price (West Texas Intermediate) bottomed out at around $20.   Understandably the Trump administration worked very hard to get  the Saudis and others to reduce production.  But even with the reported success in getting an agreement, it seems unlikely that prices will rise to the $50 a barrel needed for shale oil to make a profit.  

But the story is worse than that.  In an article in the New York Times on Sunday, author Bethany McLean https://www.nytimes.com/2020/04/10/opinion/sunday/coronavirus-texas-fracking-layoffs.html 

pointed out that very few shale oil producers have actually made any profit over the last ten years.  The way the shale-oil producers have stayed in business is by drawing in billions in capital from investors convinced by the years of high energy prices and the talk of ‘peak oil’ that, in the long run, the supply of this non-renewable resource will dwindle and push prices up.  In essence it has been like a Ponzi scheme.

To date this has kept most producers in business, but the current Coronavirus shock to prices is beginning to take its toll, with shutdowns and some bankruptcies (McLean mentions Whiting Petroleum whose stock once traded at $150 per share).  Will investors still be prepared to pump money into an industry that hasn’t made any money during ‘good years’ now that the ‘bad years’ are here?  No doubt many will start looking more closely at the way the shale oil industry operates, and whether it will ever be able to yield a return on investment even if prices rise well above $50 a barrel.  For example the McLean article quotes hedge fund manager David Einhorn who analyzed 16 publicly traded shale companies and found that between 2006 and 2014 they spent $80 billion more than they received from selling oil.  

Industry boosters argue that technological innovation will reduce costs and help make the industry more profitable.  But the geology seems to suggest things will move in the opposite direction. The history of fracking seems to indicate that production from any well drops off sharply after about a year or so, forcing the search for new sites.   And when wells are clustered too close together, extraction from one negatively affects the other wells. 

Even before the current price shock investors were beginning to become impatient and wanted to see some return on their investments, before sinking more money into these companies.  Indeed in September of 2018, Ms. McLean published an article (again in the NY Times) 

https://www.nytimes.com/2018/09/01/opinion/the-next-financial-crisis-lurks-underground.html 

pointing out all of these financial problems with the fracking industry.  But the gist of her article was the suggestion that the collapse of the shale oil industry could bring about a financial collapse, not unlike the sub-prime collapse of 2008.  

Moody’s reported that in the third quarter of 2019, 91% of defaulted corporate debt was because of oil and gas companies. Ms. McLean writes  ‘And North American oil and gas drillers have almost $100 billion in debt that is set to mature in the next four years.’  

‘It’s still unclear where most of this debt is held.  Some of it has been packaged into so-called collateralized loan obligations, pieces of which are held by hedge funds.  Some of it may be on bank balance sheets’.   It all sounds very much like the mortgage debt of the sub-prime crisis of 2008.  It could well be that, as Bethany McLean titled her 2018 article, ‘The next financial crisis lurks underground’.