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The price of oil is cratering.
On the futures exchange, the price of oil for May delivery has fallen to $8!
That is unimaginably low. Insanely low. Historically low.
1/ https://twitter.com/thestalwart/status/1252277424986914818
On the futures exchange, the price of oil for May delivery has fallen to $8!
That is unimaginably low. Insanely low. Historically low.
1/ https://twitter.com/thestalwart/status/1252277424986914818
Oil is traded on exchanges via contracts.
A contract equals an agreement by the seller to sell 1,000 gallons of oil at whatever price the buyer paid for the contract.
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A contract equals an agreement by the seller to sell 1,000 gallons of oil at whatever price the buyer paid for the contract.
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So, if you bought a “May contract” at $8 per barrel and held onto it until trading expired, you’d be on the hook to pay $8,000 and in return you’d get a May shipment of 1,000 barrels of oil.
A year ago, those 1,000 barrels would have cost you $57,000.
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A year ago, those 1,000 barrels would have cost you $57,000.
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May contracts “expire” this week. Meaning, they settle and become final.
The buyers owe the money. The sellers owe the oil.
With prices at historic, unbelievable lows, you’d think buyers would be stocking up so to speak...
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The buyers owe the money. The sellers owe the oil.
With prices at historic, unbelievable lows, you’d think buyers would be stocking up so to speak...
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Well, they can’t apparently. They have no place to put the oil. They’re full.
Between the massive slowdown in consumption due to the coronavirus and the glut in the market, buyers are now plain out of room to store more oil.
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Between the massive slowdown in consumption due to the coronavirus and the glut in the market, buyers are now plain out of room to store more oil.
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And with no one buying, the May delivery prices are cratering. $8 a barrel is as close to free as oil can come.
In theory, refiners will use up some of their inventory and they’ll be some demand for June deliveries.
But as of now, those contracts are trading at $22.
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In theory, refiners will use up some of their inventory and they’ll be some demand for June deliveries.
But as of now, those contracts are trading at $22.
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I’ll leave it to others to describe the upsides/downsides of unbelievably cheap oil.
One obvious effect is cheaper gasoline and fuel oil (at some point).
Another effect, unfortunately, is worse economics for clean energy.
Oil is cheaper than alternatives.
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One obvious effect is cheaper gasoline and fuel oil (at some point).
Another effect, unfortunately, is worse economics for clean energy.
Oil is cheaper than alternatives.
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That cheapness comes at a cost to the industry though. Oil producers can’t sustain themselves at those prices. It’s cheaper to leave it in the ground.
So, a prolonged down market for oil would do a whole bunch of things. One of them is shakeout the US energy sector.
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So, a prolonged down market for oil would do a whole bunch of things. One of them is shakeout the US energy sector.
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A bunch of companies would go bankrupt. A bunch would stop producing oil. A bunch of people would lose their jobs.
If we had an actual president, we would have been aggressively working to reduce fossil fuel dependence.
Instead, we have a guy who props up the industry.
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If we had an actual president, we would have been aggressively working to reduce fossil fuel dependence.
Instead, we have a guy who props up the industry.
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It is going to be all but impossible to prop up the American oil and gas industry without a massive bailout at this point.
And if there is one thing voters ain’t likely to love, it’s bailing out oil companies.
Trump is in a real vise thx to the oil price collapse.
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And if there is one thing voters ain’t likely to love, it’s bailing out oil companies.
Trump is in a real vise thx to the oil price collapse.
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Watch the headlines.
We’re only a few weeks away, I suspect, from executives in the energy sector warning that American oil companies will collapse without government bailouts.
Trump will be in a lose-lose position.
It’s coming.
11/11
We’re only a few weeks away, I suspect, from executives in the energy sector warning that American oil companies will collapse without government bailouts.
Trump will be in a lose-lose position.
It’s coming.
11/11
