Economy

Oil Now Worth Less Than Barrels It’s Stored In

JM Ashby
Written by JM Ashby

Remember Trump's scheme to increase the price of oil and the corresponding price of gas for Americans by entering into a pricing cartel with Saudi Arabia and Russia?

Saudi Arabia, Russia, Mexico and a handful (not all) American companies agreed to cut output in an attempt to prop up oil prices, but we can now say with some certainty that Trump's scheme was a failure.

The price of oil dropped to about $10.34 per barrel this morning, the lowest price since 1986.

Oil plunged to the lowest level since 1986 as a deadly pandemic ravaging global economies threatens to erase an entire decade of demand growth, slashing thousands of jobs and wiping out hundreds of billions of dollars from company valuations. [...]

“There is little to prevent the physical market from the further acute downside path over the near term,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”

I was about 2-years-old the last time oil was this cheap so you may want to consider filling up your own gas tank later today if you're running low.

Trump's scheme to rig prices didn't work because there's simply no demand for oil right now, but the drop in demand is also partially Trump's fault.

Trump could not have stopped the drop in demand across the rest of the world, but we have a nearly-nationwide economic shutdown here in the United States because the Trump regime wasted the entire months of January and February and most of March doing absolutely nothing to prepare for or prevent the spread of the coronavirus. Even now at nearly the end of April, the Trump regime is arguably doing nothing.

Our economic pain and the corresponding drop in oil prices are both a result of Trump's unparalleled incompetence.

Americans industries ought to add 2 and 2 together and realize that electing a competent Democrat to office is worth far more than chipping away at a handful of regulations. Electing or reelecting someone like Trump is asking for what's happening right now.

Is the ability to pump more mercury into the atmosphere worth more to you than simply surviving at all?

Between the time I began writing this post and the time I finished it, the price of oil actually dropped below $10 per barrel.

Update.. the price of oil is currently less than $1 per barrel after 2 o'clock, the lowest level ever recorded

Update 2... the price of oil is now less than zero and is trading in negative territory

Update 3... oil futures closed at negative -$37.63, meaning oil companies paying distributors just to take it off their hands

  • gescove

    Everything Trump touches dies. I mean, I thought you couldn’t top going bankrupt running a casino. But now Trump’s efforts (or lack thereof) have started to kill an $80+ trillion dollar global industry (which, don’t get me wrong, needs to be killed). If Rex Tillerson thought Trump was a moron before, I wonder what he thinks now?

  • muselet

    TPM reader FL wonders why we don’t see this period as an opportunity to move toward a less carbon-intensive world.

    I think JL has a good point. There’s also a direct economic angle: there will be a lot of underemployed or unemployed people when the world finally gets a handle on Covid-19, so why not put them to work on green infrastructure projects?

    Yeah, I know, that won’t happen because socialism! or pollution’s good for you! or don’t take our pickups away! or some such—and the oil companies won’t be happy only making relatively small quantities of lubricants—but it’s a nice fantasy.

    For now, I’ll just read stories about oil prices crashing despite Saudi Arabia’s (and Donald Trump’s) efforts to manipulate the market, and laugh and laugh and laugh.

    –alopecia

    • JMAshby

      I have been laughing for nearly an hour straight while watching the price of oil fall from $10 to $4 to $2 to less than $1

      I don’t think we’re going to make a big shift toward low or carbon-free energy just because of the pandemic, but I do feel like this is a preview of how worthless fossil fuel will be when we eventually do that.

      Energy companies should take a good, hard look at this and consider their own transitions to solar energy. People will always need to power their homes and businesses, but the oil and gasoline industry can evidently die the instant that people have a reason to stay home.

    • katanahamon

      Oil isn’t just for lubricants though. Think of the mountain of plastic products a single hospital patient uses..from IV tubes to the bags that hold antibiotics and medicines and protective goggles and respirators and emesis basins and syringes..just that one industry is extremely dependent on oil, I’ve always thought that one day people will be appalled we burned it for fuel when we need to save it for other things. I remember in grade school in the late seventies, talking about oil being a finite resource, ppl waiting in gas lines..so much for learning from history. Rump has relaxed emissions and mileage requirements….bleh…

      • gescove

        Thanks for the reminder on the impacts of plastics derived from petrochemicals.

      • muselet

        Absolutely true. However, the oil companies make lots more money on motor fuels than plastics.

        –alopecia

        • katanahamon

          Right..for now..this article just shows that the opportunistic bastards are planning well ahead..

          • muselet

            Of course they are. They may be evil, but they’re not stupid.

            But there are other feedstocks for (some) plastics, including some that are far less noxious. The petrochemical industry is going to have competition, which it’s not used to.

            –alopecia

    • Draxiar

      Anyone that has read my snarky posts here (and I thank you for that!) can attest that I have been saying for years that sustainable energy production is the next industrial revolution and I stand by that still. The Covid-19 Event may not be the single driving force to *ahem* fire that up but it may become one of several things to do so.