× Expand Richard Drew/AP Photo A television screen on the floor of the New York Stock Exchange this morning

The stock market gave way on Monday, falling so rapidly that circuit breakers temporarily kicked in and halted trading. Coronavirus and global recession fears caused the crash, but the triggering event was a collapse in oil futures over the weekend, as oil-producing nations bickered their way into a price war. This makes the already existing threat of widespread defaults in energy-related debt almost certain, raising the likelihood of a highly regional recession—including in the industrial Midwest states key to Donald Trump’s 2016 victory.

Coronavirus had already depressed demand for oil, as businesses shuttered and people sheltered in place instead of driving to work. Chinese quarantines reduced demand in the world’s most populous country by 20 percent per day, and with the disease going global, there’s just going to be less need for oil for an indeterminate period.

To preserve prices from collapsing amid oversupply, the Organization of Petroleum Exporting Countries (OPEC) met late last week to try to reach agreement on across-the-board production cuts. Russia refused, and the talks failed. On Saturday, Saudi Arabia retaliated by cutting crude oil prices significantly and opening wells to increase output. Benchmark prices dropped nearly 30 percent in a day as a result, and analysts predict that oil will fall as low as $20 a barrel.

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For consumers, that might sound positive, if it flows to them in the form of lower gas prices. (Of course, if you’re not going out in public, your gas savings are already baked in.) But America today is a more significant oil-producing nation than ever before. And we’ve seen what happens in oil-patch states when prices plummet. In 2015 and 2016, several states went into recession after a downturn in oil prices, causing economic stress that was largely hidden amid rising national economic indicators.

We’re in for a worse shock now. First, while oil prices fell considerably five years ago, at their nadir companies could still fetch $40 a barrel—about double the expectation for the current crash. Oil was last that cheap in the late 1990s, when America didn’t have nearly the same fossil fuel output and the rest of the economy was rock-solid.

We desperately need a major stimulus for this economy, targeted in particular at regions that we now know will falter.

Second, while the fracking boom has been with us for a while, with new techniques accessing previously inaccessible oil and gas, drilling companies have never been so highly leveraged. As I noted at the end of February, the fracking industry was already falling apart, as newer U.S. wells that cost more to build need high prices to break even. The default rate on energy-related bonds as of August 2019 was already 5.7 percent, and oil was trading around $60 a barrel at that time.

So a spike in defaults seems almost certain at this point. Who loses out in that scenario? Obviously, some oil companies are going to go bankrupt. The 2019 U.S. Energy and Employment Report (USEER) lists 6.7 million jobs in the energy sector; we are likely to see widespread carnage there. That includes high numbers of workers in heavily fracked states like Ohio, Michigan, and Pennsylvania.

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But debtors, and debtors’ employees, are not the only ones at risk: What about the financiers who hold the debt? Most of this energy-related corporate debt has been securitized, pushed into low-grade junk bonds. Who owns the debt? We don’t really know. Welcome to the U.S. financial system circa 2020.

That’s where you get the possibility of a credit crunch, a financial crisis that has been long-rumored. Returns on corporate bonds have already fallen the past two months, and some banks report having trouble trading them. Rating agency downgrades could make it impossible to refinance out of trouble.

Corporate debt isn’t a big enough market to trigger a recession, and low interest rates could enable financial firms to escape trouble. But widespread energy defaults could create a tipping point. How much of this toxic debt sits on bank balance sheets? How much sits with counter-parties to the banks?

We still have a deeply interconnected financial system, meaning that debt defaults in one corner can spread virally, something none of us want to hear right about now. And when bank debt proliferates, lending could slow and credit could be hard to come by. That would migrate these problems in the energy sector across the economy. We are currently seeing the stress in short-term lending markets that banks routinely use. As if this weren’t enough, front-line traders working remotely because of the pandemic may increase the possibility of a hiccup.

I raised the corporate debt issue previously when I thought the downturn in energy commodity prices would be far more mild. Now we’re nearing a breaking point. What can be done?

First, there’s a dire need for transparency for understanding the stresses in the system. Wells Fargo executives are on Capitol Hill this week, for an unrelated series of hearings on consumer fraud. At least someone should ask them how much energy-related debt sits on their books, and how much sits on the books of their counter-parties. Every major bank needs to come clean with this information, so we understand the stakes.

Second, we desperately need a major stimulus for this economy, targeted in particular at regions that we now know will falter. Nancy Pelosi and Chuck Schumer released a proposal Sunday night that included expanded unemployment insurance and food assistance, which will be required in fossil fuel–reliant states.

Some Democrats may be conflicted about handing Donald Trump and the Republicans relief before a major presidential election. They should put that aside. If government cannot help people now, there’s no point for its existence. They should also take the opportunity to build long-lasting safety net supports, like permanent, universal paid sick leave, or automatic stabilizers that kick in when the economy tips into recession, eliminating any political calculations that might accompany downturns.

Fiscal stimulus can mitigate some of the damage, but not all of it. The public health consequences of coronavirus are paramount, but the economic fallout will loom large, especially in the fossil fuel-reliant states. This could be a moment to rethink that reliance, but we must primarily focus on making sure as few people suffer as possible.