With 3 billion people sheltering from the global pandemic, oil demand has plummeted. Crude storage locations are filling up. 

Electrek, By Bradley Berman

© Electrek | In the preview of EV future, oil producers are paying customers to take it off their hands

US drillers are shutting down production. And some producers are paying customers to take their oil. In a glimpse into a future when nearly all vehicles run on electricity, some crude prices are experiencing rollercoaster-like dips, rapid ascents, and plunges to nearly zero.


Analysts at Goldman Sachs warn about “landlocked crude prices going into negative territory.”

Bloomberg says “negative oil prices – when producers are effectively paying customers to take the oil ­– aren’t only possible, but already a reality.”

This doesn’t mean that the price at the pump will be free. While producers might sell at a loss, there are still costs associated with refining, transporting, retailing, and taxing gasoline and diesel fuel.

The average US price for gasoline dipped below $2 yesterday. Some Midwestern stations are selling it for less than a buck. Pump prices are expected to drop further.

The oil industry is now under pressure to find places to store oil. Bloomberg writes:
For landlocked drillers, though, there are greater worries. They are facing a lack of local storage, and pipeline companies asking them to cut back or prove they have a buyer for their crude before loading. They simply can’t get oil to the right place, at the current price. Meanwhile, refineries are cutting back as they reach storage limits.
Antoine Halff, a senior research scholar at Columbia University’s Center on Global Energy Policy, told E&E News:
The closer we get to full tanks, the closer we get to zero price. 
The demand response is suppressed by the coronavirus. Once that is behind us, you may see a sharp recovery.
Until demand bounces back, we are likely to see temporary spikes based on output from producers, most notably Saudi Arabia and Russia. Benchmark US crude oil was sharply higher today before settling around $25 per barrel. It had dipped to $20 earlier this week, its lowest price since 2002.

This article was originally published by Electrek. 
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