Comparing Sweden to Norway and Denmark

Sweden is often cited as an example of a country that has imposed relatively modest restrictions on movement and commerce in response to the ongoing COVID-19 pandemic. So as Western nations focus on easing COVID-related restrictions, I thought it might be useful to compare the experience of Sweden to date with those of its Nordic neighbors, Norway, and Denmark.

The first graph below shows the number of daily cases in three countries.

Source: European Centre for Disease Prevention and Control

This next chart shows the number of daily COVID-related deaths.

Source: European Centre for Disease Prevention and Control

Taken together, they support an initial impression that Sweden's experience has been more severe than those of Norway and Denmark. (Note that the number of daily deaths in Sweden exhibits a marked weekly seasonality. I presume this is a reporting effect rather than a genuine seasonality in actual deaths.)

We can gain some further perspective on this data by viewing cases and deaths on a cumulative basis, shown in the next two graphs.

Source: European Centre for Disease Prevention and Control

Source: European Centre for Disease Prevention and Control

Again, the impression created by viewing the data from this perspective is that the pandemic has spread more broadly and resulted in greater mortality in Sweden than it has in Norway and Denmark.

Of course, Sweden has a larger population than do Norway and Denmark. In particular, the population of Sweden is slightly greater than 10 million -- almost twice the populations of Norway and Denmark (5.4 million and 5.8 million). With this in mind, we also should consider infection and mortality on a per capita basis in each country, as shown in the next two graphs.

Source: European Centre for Disease Prevention and Control

Source: European Centre for Disease Prevention and Control

The cumulative numbers of cases as a percent of the population in each country are broadly similar, highlighting the importance of adjusting for population. On the other hand the cumulative numbers of deaths as a percent of the population in each country are quite different, with the death rate in Sweden significantly greater than the death rates in Norway and Denmark.

The population of Sweden is skewed slightly toward older age groups relative to Denmark and Norway, so we might expect a greater death rate per capita in Sweden than in Norway and Denmark simply due to Sweden's skew toward an older demographic profile.

The data in the next table helps us asses this situation. Of particular interest is the number of deaths in Sweden that would be expected if the mortality profile in Sweden as a function of age and sex were the same as the average profiles in Norway and Denmark.

Note that the number of reported deaths in Sweden is nearly four times larger than would be expected given the demographic adjustments derived from Norway and Denmark. So even after adjusting for population, sex, and age, the mortality figures in Sweden appear particularly bad.

Other demographic factors that have been mentioned are ethnicity and income. I don't currently have ethnicity data for these three countries, but data is available for immigration, which might be a rough proxy in these countries for ethnicity (and perhaps also for income). In particular, 20.0% of the Swedish population is foreign-born according to the UN Department of Economic And Social Affairs. The figures for Norway and Denmark are 16.1% and 12.5%.

Is the higher percentage of immigrants living in Sweden a likely cause of the higher rate of COVID-related deaths in Sweden? It seems doubtful. Even in the extreme scenario in which COVID-related deaths were concentrated entirely within immigrant populations in the three countries, the expected number of COVID-related deaths in Sweden would be only modestly greater than the figure in the previous table, assuming that the demographic profiles of the immigrant communities were roughly comparable to the demographic profiles of the overall population in each country. If anything, my sense is that the immigrant communities tend to skew toward younger age groups, making it even less likely that relative immigration percentages are responsible for the relatively large number of COVID-related deaths reported in Sweden.

Two Hypotheses

At this point, these data sets appear consistent with two hypotheses:

1. The Swedish health care system is less capable than those of Norway and Denmark in preventing COVID-related deaths
2. The relatively moderate response to the pandemic in Sweden has resulted in a greater infection rate in Sweden.

I'm not aware of any evidence suggesting the capabilities of the Swedish health care system are inferior to those in Norway and Denmark, but neither can I completely discount this possibility.

On the other hand, it seems entirely reasonable -- even expected --  that the relatively moderate response to the pandemic in Sweden would lead to a greater infection rate.

But if that were the case, why is the cumulative reported cases per capita in Sweden only modestly greater than those in Norway and Denmark?

As it happens, Sweden appears to have implemented a less intensive testing regime. For example, Norway is reported to have administered 28,614 tests per million people, while Denmark is reported to have administered 26,900 tests per million people. In contrast, the rate of test administration in Sweden is reported to be only 9,357 per million -- about one third the rates of Norway and Denmark. (Source: https://www.worldometers.info/coronavirus/#countries)

Taken together, my view is that the data suggests that the population in Sweden is suffering considerably greater COVID-related mortality than are the populations in Norway in Denmark because of the relatively modest restrictions placed on movement and commerce in Sweden. The fact that the reported infection rate in Sweden is only modestly greater than those in Norway and Denmark is due to the much lower level of testing administered in Sweden.

Implications

With restrictions being eased throughout much of Europe and the US, the experience of Sweden may well serve as a useful example. In particular, the Swedish experience suggests that infection rates and mortality rates are likely to increase in locations in which restrictions are eased.

Of course, there's nothing surprising about this conclusion. Infectious disease specialists have been warning us of the relation between restrictions and infection rates since the start of the pandemic. The point of this cursory analysis is simply to help dispel the notion that Sweden somehow demonstrates that there is no trade-off between the severity of restrictions and the rate of mortality. In fact, the comparison between Sweden, Norway, and Denmark provides considerable evidence for the existence of this trade-off.

Nothing about this analysis suggests that the choices made in Sweden are somehow inferior to those made in Norway and in Denmark. In particular, we've made no effort to address the relative economic costs borne by the populations in these countries. Neither have we addressed other, non-monetary costs, such as mortality due to other causes in these countries. And it's too early to assess whether Sweden's approach might lead to greater immunity and/or fewer deaths over the long run. 

But as societies weigh various trade-offs, it's useful to note that the data coming from these Nordic countries supports the notion that more moderate restrictions on movement and commerce can be expected to lead to an increase in rates of COVID-related infection and mortality, everything else equal.

Negative WTI Prices

Negative prices for May WTI futures have prompted a lot of confusing comments in the press. I thought I'd add a few thoughts.

The graph below shows spot prices for three crude benchmarks: WTI (Cushing, Oklahoma); Light Louisiana Sweet (St James); and Brent (North Sea).

LLS is coastal, and Brent is seaborne, so it's relatively straightforward to arrange transport for these benchmarks. WTI is inland, which means it needs to be transported via fixed pipelines, by rail, or by truck. For this reason, the difference between WTI and LLS typically reflects the marginal cost of transport between the two hubs.

When we observe the spread between LLS and WTI widen, it's typically an indication that the marginal cost of transport from Cushing to the Gulf Coast has increased. Note that current prices for LLS and Brent are still very much in line with one another, despite the thousands of miles separating the two reference points, as shipping is relatively straightforward to arrange.

The negative prices observed for WTI have been attributed to the fact that storage in Cushing is near capacity. And clearly, storing a barrel in Cushing for a month and delivering into the June WTI contract would be an option for people able to arrange storage. But it's worth remembering that an alternative to storing a barrel in Cushing is to transport the barrel elsewhere, where crude is selling for a higher price.

I've seen people suggesting that the higher price for June WTI futures suggests that oil market participants are expecting a rapid economic recovery in the US. Given the economics of storage and transport, I believe these comments are incorrect. Rather, the price difference reflects the fact that market participants believe they have time to contract for June storage and/or transport at reasonable rates. It's difficult to increase storage and pipeline capacity on short notice, but it is possible to arrange for additional rail cars and tanker trucks to travel to Cushing for June delivery. And in the meantime, traders now have plenty of time (and incentive) to close long positions well ahead of delivery.

One of the cheaper means of storing crude is to simply leave it in the ground. And of course that's the decision that the Saudis and Russians would like US producers to make. But some of these producers have hedged the prices they receive by selling the crude forward, including via the futures market. And in that case, they have every incentive to continue producing and to deliver their barrels at the agreed prices. But at some point, these hedges will roll off, in which case many of these producers will be facing spot and forward prices that are well below their marginal production costs.

Why isn't the Federal government taking advantage of these negative prices to further fill the strategic petroleum reserves? The SPR storage facilities are all along the Gulf Coast, so the managers of the SPR face the same transport bottlenecks as the rest of the market.

Are we likely to see negative prices for the June 2020 WTI contract, particularly going into delivery? Given the relatively inelastic nature of storage and pipeline transport capacity, it's a distinct possibility, particularly if producers have sold forward a lot of production using the June futures contract. In that case, I'd be concerned that the extra rail cars and tanker trucks that can brought into the region over the next month may be insufficient. My expectation is that one month is sufficient time for the market to make arrangements to avoid a fiasco of the sort seen this week, but I don't have data on actual production sold forward, so this is only a hunch.

Finally, it's worth noting that the debacle in Cushing this week ultimately stems from the fact that there isn't sufficient capacity to transport all the crude that the market would like to see transported to the Gulf Coast. And this is a common theme developing during this COVID-19 pandemic. In many places, there's an insufficient number of ICU beds, an insufficient number of ventilators, an insufficient number of masks and gloves, an insufficient number of test kits, and an insufficient number of trained medical personnel. There's insufficient capacity to get dairy products and produce into retail channels. Many places have insufficient broadband capacity as more people work from home.

Just-in-time practices have improved capital efficiency under normal circumstances, but of course they're not robust to disruptions. And I suspect we'll be seeing more investment in infrastructure that would be judged inefficient during normal circumstances but that would be greatly appreciated during crises. At least I hope so.