How Did Oil Become Worth Less Than Nothing On Monday?
I have good news for all of us. I'm not an economist. In other words, I'm not a money guy.
Oh, I like a little cash in my pocket and I've been able to keep my head above the proverbial water for quite a bunch of years on the planet. I've been able to feed myself and my family, keep a roof over my head and see a few cool places over the decades.
But I'm not the guy you come to when you have money questions. But when I saw that on Monday a barrel of oil was worth less than zero, well, that made me go...huh.
I've enjoyed the low gas prices lately, even though I'm not driving much at all in these COVID 19/Coronavirus times. There's something psychologically satisfying driving up to a gas pump and seeing a price that begins with 1.
But even this 'old farm boy paused when I saw that the price of a barrel of oil was down, down, down...and then less than zero. Less than free? What??
Well, it's all kind of complicated, but you can get all the details in an article from the New York Times here. And while the article talks about Saudi Arabia, Russia, futures prices and a whole lot more, it seems to me it comes down to this:
Too much oil. Way too much oil.
There's a lot of reasons for that, and one of the most significant is the Coronavirus. You and I aren't driving nearly as much, and the planes and trains and other forms of transportation have slowed down, too. In some cases almost to a complete stop.
And companies and countries are running out of the room, literally. i.e., a backlog if you will. So companies were in effect saying 'We don't have room here, I'll pay you $30 a barrel if you'll take a bunch of our hands'.
Now, of course, it's all more complicated than that, but it seems to me, that's kinda how it sounds.
Supply and demand. There is a huge supply and the demand just isn't there at the moment. And that made for a historic Monday.
Oil was going for less than zero. Let's see where it goes from here.
The New York Times Contributed To This Article