COVID Locks Down the World, Oil Goes Negative and George Floyd’s Death Ignites a Global Uprising

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 July 2020 | Reporting Period: 3 April – 2 July 2020

Quarterly Briefing

• COVID-19 shuts down Caribbean tourism completely in Q2 2020; Jamaica’s economy faces its worst contraction in decades.
• WTI crude oil futures briefly go negative on April 20, trading at minus $37 per barrel as storage capacity overflows; the oil industry faces existential pressure.
• George Floyd is killed by Minneapolis police on May 25; Black Lives Matter protests spread to all 50 US states and more than 60 countries.
• OPEC+ agrees to the largest oil production cut in history in April — 9.7 million barrels per day — to arrest the price collapse.
• Yemen’s civil war enters its sixth year; UN warns of the world’s worst humanitarian crisis as COVID compounds the crisis.
• Jamaica’s diaspora remittances hold up strongly despite the global recession; the housing market sees unexpected resilience.

Prologue: The World Locked Down

The second quarter of 2020 was, for most of the world, the most economically devastating three-month period since the Great Depression. COVID-19, which had been identified as a pandemic by the WHO on 11 March, had by April resulted in lockdowns covering approximately 4 billion people, the suspension of nearly all international air travel, and an economic contraction of a magnitude that no living policymaker had experienced in peacetime. For Jamaica and the Caribbean — whose economies are uniquely dependent on international tourism, remittance flows and commodity trade — the crisis was qualitatively different from any since the end of the Second World War. Not a cyclical recession to be managed, but an external shock to the fundamental economic model of island tourism that had no precedent and no clear endpoint.

Against this extraordinary backdrop, the quarter produced two additional global events of historic significance: an energy market collapse so extreme that oil briefly traded at prices below zero, and the killing of George Floyd in Minneapolis that triggered the largest sustained social protest movement in the United States in fifty years and sent protests into the streets of London, Paris, Amsterdam, Sydney and Montego Bay. For the Caribbean, the Floyd protests had both a political and an economic dimension: they generated a global conversation about the legacies of slavery and colonialism that touched directly on Caribbean history, culture and diaspora identity.

Oil’s Catastrophic Collapse

On 20 April 2020, something happened in energy markets that had never happened before: the front-month futures contract for West Texas Intermediate crude oil, the US benchmark, fell below zero dollars per barrel, eventually reaching minus $37.63. The event was primarily a technical artefact of storage capacity: with oil demand collapsed by COVID-related lockdowns and with US oil storage nearly full, traders who held futures contracts set to expire the next day faced the prospect of taking physical delivery of oil they had nowhere to put, and paid to pass the contracts on. But the episode dramatised the scale of the demand collapse in oil markets: global demand had fallen by approximately 30 million barrels per day — roughly 30 per cent of total demand — in weeks.

OPEC+ responded with the largest coordinated production cut in the organisation’s history: 9.7 million barrels per day agreed on 12 April, with further cuts from individual members. The reduction stabilised markets over the following weeks, and by June Brent had recovered to approximately $40 per barrel. For Caribbean oil importers, including Jamaica, the collapse and partial recovery of oil prices provided a brief and unexpected relief: fuel costs fell sharply through April and May. That relief, however, was temporary and came with an economic context — total economic shutdown — that eliminated almost all of the sectors that would benefit from cheaper energy.

George Floyd and the Global Reckoning

On 25 May 2020, a Minneapolis police officer knelt on the neck of George Floyd, a 46-year-old Black American man, for approximately nine minutes during an arrest. Floyd died. The event was filmed by bystanders and the video spread globally within hours. Protests began in Minneapolis the following day and spread to all 50 US states within a week, with millions of Americans marching in the largest demonstrations since the 1960s civil rights movement. The protests spread internationally: London, Amsterdam, Brussels, Paris, Berlin, Sydney and dozens of other cities saw demonstrations in solidarity. In Jamaica, protests took place in Kingston and Montego Bay, and the government issued a formal statement connecting Floyd’s death to the broader legacy of racial injustice.

For the Caribbean and Jamaica specifically, the Floyd protests resonated at a level that went beyond sympathy with American anti-racism movements. The Caribbean’s history — centuries of transatlantic slavery, colonial exploitation and post-colonial disadvantage — meant that the conditions Floyd’s death illuminated were not foreign but continuous with the region’s own lived experience and political consciousness. The global conversation about structural racism, police violence and the legacies of slavery that the protests generated was a conversation in which Caribbean voices had a central and legitimate claim. For Jamaica’s diaspora in the United States, the protests were a moment of acute anxiety and solidarity simultaneously.

For Caribbean economies, the protests had specific market implications: civil unrest in US cities affected consumer confidence, complicated the already-uncertain US economic recovery, and raised questions about the US travel market that would be Jamaica’s source of recovery when borders reopened. The longer-term conversation about reparations for slavery — renewed with force by the Floyd protests — also directly engaged Caribbean governments, several of which have active reparations diplomacy programmes in discussion with European former colonial powers.

COVID’s Impact on Caribbean Tourism

Caribbean tourism was, for practical purposes, completely suspended in Q2 2020. Most Caribbean airports closed to commercial international flights in late March or April. The cruise industry — which typically brings significant spending to Jamaica’s ports — had suspended operations globally in mid-March. Hotels, resorts and tour operators were operating at zero or near-zero occupancy. The economic multiplier effects of this shutdown rippled through every sector of Jamaica’s economy: transport, food and beverage, retail, agriculture and the informal sector all saw demand collapse.

Jamaica’s government responded with emergency measures: a Disaster Risk Management Act declaration gave the government broad powers to impose movement restrictions; the unemployment benefit was expanded; financial support programmes were established for vulnerable households. The National Housing Trust maintained mortgage relief provisions for members who had lost employment. The question that dominated the quarter’s policy discussions was not how to manage the current crisis but how to design a reopening that would allow tourism to resume without exposing Jamaica to a second wave of COVID infection that would require another shutdown.

Yemen: The Forgotten War Meets the Pandemic

Yemen’s civil war, which began in 2015 and had been recognised as the world’s worst humanitarian crisis since 2018, entered its sixth year in a situation made worse by COVID-19. With a health system that had already been largely destroyed by five years of bombing, Yemen had almost no capacity to respond to a viral pandemic. The UN humanitarian office reported that Yemen’s COVID death rate was proportionally among the highest in the world, though testing was so limited that the true scale of the outbreak was not measurable. The war’s parties continued fighting despite a UN-requested ceasefire appeal.

For Caribbean energy markets, Yemen remained relevant primarily as a contributor to Red Sea security uncertainty. Houthi attacks on Saudi oil infrastructure and occasional strikes on shipping lanes connecting the Gulf to the Indian Ocean were an ongoing background risk to Gulf energy exports. A severe escalation in Yemen could threaten the Bab el-Mandeb strait, through which approximately 9 per cent of global seaborne oil trade passes. In Q2 2020, with oil demand collapsed by COVID, the risk premium from Yemen was largely irrelevant. But the conflict’s structural threat to energy export routes remained as real as ever.

Jamaica: Enduring the Storm

Jamaica’s government was focused intensely on managing the immediate COVID crisis through Q2 2020 while attempting to preserve the fiscal and institutional frameworks that had been painstakingly constructed through the IMF programme years. GDP was contracting sharply; tax revenues had fallen precipitously; fiscal space for emergency spending was constrained by the debt stock that the COVID shock would now increase. The government’s commitment to maintaining macroeconomic stability — even as it expanded emergency spending — was consistent with the discipline of the reform era but required difficult choices about the scale and targeting of relief measures.

Remittances provided an unexpected source of resilience. Despite the US economic contraction, Jamaican diaspora households maintained remittance flows that were broadly comparable to 2019 levels. US fiscal stimulus — the CARES Act’s $1,200 direct payments and expanded unemployment support — bolstered diaspora household incomes even as the broader US economy contracted. These flows supported household consumption in Jamaica and maintained some demand in the residential real estate market: diaspora property purchases continued, albeit at reduced pace, through the Q2 lockdown period.

Looking Ahead

The third quarter opens with the Caribbean beginning cautious tourism reopenings — Jamaica is preparing to reopen its borders to international visitors with COVID protocols in place — and with global geopolitics still largely overshadowed by the pandemic. The US election in November looms as a moment that will reshape Caribbean-US relations and global climate and multilateral policy depending on its outcome. Hurricane season has begun, adding natural disaster risk to pandemic exposure. The oil market has partially recovered but remains well below 2019 levels. For Jamaica, survival through 2020 with the economic and institutional foundations intact for an eventual recovery is the defining challenge. As this edition is published on July 3, it remains the only realistic near-term goal.

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Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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