This month, there are some exciting changes in the pipeline with regards to travel. So if you’ve been going stir-crazy, hoping to travel with ease to your favourite holiday destinations, then you could be in luck. Likewise, if you’re an investor, you’ll be monitoring the travel industry and regulations, to see the impact on the financial markets.
Of course, the global situation, with regards to the coronavirus pandemic, is still extremely uncertain and vulnerable to change, so the proposed rules could also change reactively, in response to increased transmission rates or the emergence of a new variant, for example.
However, by the end of July, it was revealed that around 86% of adults in the UK had received their first dose of the vaccine, which has had a dramatic effect on the decision to further ease travel restrictions this month. As more people get back travelling, we should see a significant increase in demand for oil, therefore, in this article we will take a look at the effect that this month’s updates to the current travel rules could have on oil prices.
Prior to a rule change that was implemented this month, all travellers arriving in the UK from amber list countries (except France) were required to quarantine for 10 days. However, the rule has recently been changed, which means that people who had received two vaccinations from outside of the UK could enter the country without quarantining.
The quarantine rule had long deterred travellers from entering the UK, simply because the process was disruptive, inconvenient and costly. This meant that some UK residents, who had not seen members of their family who lived abroad for over 12 months, could finally be reunited. The newly updated rule applies to those who have received two doses of a vaccine that had been either EU or US approved, and had received their last dose a minimum of 14 days prior to their flight, as well as providing a negative polymerase chain reaction (PCR) test on departure and on arrival.
In terms on the impact on the market, earlier this year, oil prices spiked dramatically. Demand for the global commodity increased, as more and more people were getting back in their cars and travelling more with the easing of restrictions. Of course, because supply and demand is the biggest determiner for the price of oil, and increased air travel caused by the eradication of the quarantine rule for double-jabbed travellers, could drive oil prices further.
The traffic light system
The UK government had proposed a plan to create an ‘amber watchlist’ which would contain those countries that were at high risk of moving into the red zone of the traffic light system. This system, as a whole, is used to determine whether travellers will have to quarantine when returning from specific countries, based on the levels of transmission of coronavirus in that country.
Of course, the implementation of this ‘amber watchlist’ would likely have deterred people from travelling to the countries that fell into this bracket, because of the previously unpredictable nature of travel restriction changes, some of which have come into play overnight. This would have had a detrimental effect on the recovery of the travel industry, which has begun to develop some traction, but also could have caused oil prices to fall, with the decreased demand for air travel.
However, the plan was scrapped because of the backlash that the government received from the travel industry, who anticipated that the rule would cause many tourists from England to cancel their trips to European countries.
The oil market is highly volatile and is directly impacted by external events, such as changes in legislation, particularly with regards to travel. This volatility can present traders with lucrative opportunities to profit from dramatic price changes, and by implementing an online trading platform like Plus500, for example, you could take advantage of these changes, as well as accessing risk management tools to protect your capital.