- U.S. oil prices fell to negative numbers for the first time in history, plummeting by more than $50 per barrel to negative $37.
- That means oil traders now have to pay people to buy oil.
- The drop was caused by the fact that oil-rich countries have kept producing the same amount of oil even though demand has been slowing for months because of the coronavirus pandemic. Saudi Arabia even increased its production.
- High supply and low demand resulted in a lack of storage space that made buyers not want to buy, which in turn caused panic among traders.
Oil Prices See Historic Drop
The price of oil in the U.S. turned negative for the first time in history on Monday, when prices fell by more than $50 per barrel to negative $37.
So if you’ve always wanted to get a barrel of oil for whatever reason, now is the time to do it because oil sellers are paying people to take their supply.
The negative prices basically mean that anyone trying to sell a barrel of oil has to pay their buyer $37 per barrel, instead of the other way around.
Here’s what you need to know about this historic drop, why it happened, and what it means for the economy, the oil industry, and you.
High Supply, Low Demand
There are a couple of different reasons that oil prices fell to an all-time low.
The first is fairly straightforward: demand for oil is low because of the pandemic. People are driving less, planes are flying less— the demand is just not there.
According to the Washington Post, demand is now around 25% to 30% below what it was when the economy gradually began to shut down starting in January.
But while demand was steadily falling, oil-producing countries still kept producing oil even up until early April. This was, in large part, due to a dispute among the Organization of the Petroleum Exporting Countries (OPEC).
Last month, members of OPEC attempted to strike a deal to cut production to address lower demand, but Russia refused. Long story short, that led to a price war between Saudi Arabia and Russia, and Saudi Arabia responded by flooding the market with even more oil.
Eventually, OPEC reached an agreement on April 12 to cut oil production by 10%, but the damage was already done. By then, most places in the U.S. were shut down, and air travel was a moot point.
In other words, demand was dropping while supply was pretty much staying the same— even increasing on the Saudi-side of things.
In general, when supply is greater than demand, prices fall, but that alone does not explain Monday’s drastic drop. The high supply also created another problem.
Excess supply means there are literal tons and tons of oil barrels with no one to buy them and nowhere to go. That might not sound like that big of a deal, but it is.
Think about it this way: if the demand for milk is low, and farmers have a milk supply that’s too big, they can just dump the milk. But turns out, when you do that with oil, it’s considered an environmental disaster.
Normally, any extra oil is put in storage, but with way more extra oil than the market is used to, that storage starts running out real quick.
According to energy experts, the world as a whole has an estimated storage capacity for 6.8 billion barrels— and nearly 60% is filled.
While this is a global issue, it is an especially big problem in the U.S. For example, one of the most critical storage facilities in the U.S. is in Cushing, Oklahoma, where oil traded on the market is delivered.
According to the New York Times, that facility, which can house 80 million barrels, only has room for 21 million more— meaning closer to 75% of that storage is full.
That is significant because analysts believe that the lack of storage at that key facility is what set off the panic among oil traders that eventually resulted in the negative prices.
Hate the Player and the Game
That brings us to reason number three for the drop in prices: the way oil is traded.
For those of you who are not commodities specialists on Wall Street, it’s important to know that oil is traded in the market based on its future price.
What that means is when traders sell oil on the market to buyers like oil refineries, what they are actually selling is a contract that says they will sell the oil for a set price at a set future date. That’s known as a futures contract.
So when someone, probably wearing a top hat, says “oil prices,” they are not talking about a physical barrel filled with oil— they’re actually talking about the price of the futures contract.
When you buy a futures contract, you’re agreeing to buy 1,000 barrels of oil, and the price of that contract depends on supply, demand, and quality. Each contract trades for a month, and when it expires, the buyer either needs to take physical possession of their oil or store it.
But no one wanted that oil because there is no demand and no place to store it. And because Tuesday is the last day to buy those May contracts, Monday’s events were the result of a massive rush to sell.
That’s how we got here, but what does this mean now for the economy and for you?
If you’re thinking it means you’ll get paid to pump gas at the gas station, think again. That said, in general, cheap oil means cheaper gas prices— a trend we have already been seeing— so it is likely you’ll see prices fall at the pump.
As for the oil industry, the future is mixed. Regarding the negative prices, experts generally think that is a short-term thing, with some even describing it as a technicality. Already, futures contracts for June are still trading for around $22 a barrel, which experts say is more reflective of the market than the May prices.
But $22 is still much lower than normal. If prices stay low, smaller oil producers are likely to go bankrupt, and there could be some long-term damage. As more oil facilities are forced to close and stop production, more and more people will lose their jobs. Many may be forced to go bankrupt, which could lead to more long-term unemployment.
Moreover, experts say that this is part of a much, much bigger trend. This oil situation, combined with closing factories and businesses and raising unemployment points to what is known as a deflationary collapse where there is a huge supply of goods and services that demand cannot meet, causing prices to fall.
This is something that happens, but some experts say this will be unlike anything most people have seen before.
There are a few things that can be done to help from the U.S. perspective. According to the Financial Times, this includes, “urging deeper cuts from Opec; tariffs on foreign oil imports; freeing up more storage capacity, including in the Strategic Petroleum Reserve (SPR); paying producers to keep oil in the ground; or extending financial support to oil companies.”
President Donald Trump, for his part, said Monday that he is looking at putting as much as 75 million barrels in the Strategic Petroleum Reserve, which is used to store oil during crises.
But there is already 635 million barrels of oil in the reserve, and 75 million more would put it at max capacity.
In a Tuesday morning tweet, Trump seemed to indicate he would bail out the oil industry.
But bailouts to oil companies could be controversial. When the administration recently proposed spending $3 billion to fill the reserve as part of the stimulus package, Congressional Democrats refused.
And with more people unemployed, funds for small business loans already run dry, and hospitals continuing to struggle, it is hard to imagine that Democrats will want to prioritize the oil industry.
See what others are saying: (The New York Times) (The Washington Post) (The Financial Times)
Inmates Sue Jail for Giving Them Ivermectin to Treat COVID-19 Without Consent
Four detainees who filed the suit allege that the jail’s doctor gave them “incredibly high doses” of the anti-parasite in a “cocktail of drugs” that he said were “‘vitamins’, ‘antibiotics,’ and/or ‘steroids.’”
Washington County Detention Center Lawsuit
Four inmates at an Arkansas jail have filed a federal lawsuit claiming that they were unknowingly given the anti-parasite drug ivermectin without their consent by the detention center’s doctor after contracting COVID-19.
The Food and Drug Administration, the Centers for Disease Control and Prevention, and countless other medical experts have said that ivermectin — commonly used for livestock — can be dangerous and should not be used to treat the coronavirus.
According to the lawsuit, after testing positive for COVID in August, the four men at the Washington County Detention Center (WCDC) were given a “cocktail of drugs” twice a day by the facility’s doctor, Robert Karas.
The inmates claim that Dr. Karas did not tell them that he was giving them ivermectin, but instead said the drugs consisted of “‘vitamins’, ‘antibiotics,’ and/or ‘steroids.’”
The complaint also alleges that the detainees were given “incredibly high doses” of the drug, causing some to experience “vision issues, diarrhea, bloody stools, and/or stomach cramps.”
Use on Other Inmates
The four plaintiffs were far from the only people to whom Karas gave ivermectin.
According to the lawsuit, the doctor began using the drug to treat COVID starting in November of 2020. In August, the Washington County sheriff confirmed at a local finance and budget committee meeting that the doctor had been prescribing the drug to inmates, prompting the Arkansas Medical Board to launch an investigation.
In response, Karas informed a Medical Board investigator in a letter from his attorney that 254 inmates at the facility had been treated with ivermectin.
In the letter, he confirmed that whether or not detainees were given information about ivermectin was dependent on who administered it, but paramedics were not required to discuss the drug with them.
He also admitted that after the practice got media coverage, he “adopted a more robust informed consent form to assuage any concern that any detainees were being misled or coerced into taking the medications, even though they weren’t.”
The American Civil Liberties Union of Arkansas, which filed the suit on behalf of the inmates, also claimed in a statement that after questions were raised about the practice, the jail attempted to make detainees sign forms saying that they retroactively agreed to the treatments.
The WCDC has not issued a public response to the lawsuits, but Dr. Karas appeared to address the situation in a Facebook post where he defended his actions.
“Guess we made the news again this week; still with best record in the world at the jail with the same protocols,” he wrote. “Inmates aren’t dumb and I suspect in the future other inmates around the country will be suiing their facilities requesting same treatment we’re using at WCDC-including the Ivermectin.”
See what others are saying: (The New York Times) (CBS News) (NBC News)
Medical Workers Sign Letter Urging Spotify to Combat Misinformation, Citing Joe Rogan
The letter accused Spotify of “enabling its hosted media to damage public trust in scientific research.”
Doctors and Medical Professionals Sign Letter to Spotify
A group of 270 doctors, scientists, and other medical workers signed an open letter to Spotify this week urging the audio platform to implement a misinformation policy, specifically citing false claims made on the “Joe Rogan Experience” podcast.
Rogan has faced no shortage of backlash over the last year for promoting vaccine misinformation on his show, which airs exclusively on Spotify. Most recently, he invited Dr. Robert Malone on a Dec. 31 episode that has since been widely criticized by health experts.
Dr. Malone was banned from Twitter for promoting COVID-19 misinformation. According to the medical experts who signed the letter, he “used the JRE platform to further promote numerous baseless claims, including several falsehoods about COVID-19 vaccines and an unfounded theory that societal leaders have ‘hypnotized’ the public.”
“Notably, Dr. Malone is one of two recent JRE guests who has compared pandemic policies to the Holocaust,” the letter continued. “These actions are not only objectionable and offensive, but also medically and culturally dangerous.”
Joe Rogan’s History of COVID-19 Misinformation
Rogan sparked swift criticism himself in the spring of 2021 when he discouraged young people from taking the COVID-19 vaccine. He also falsely equated mRNA vaccines to “gene therapy” and incorrectly stated that vaccines cause super mutations of the virus. He took ivermectin after testing positive for the virus in September, despite the fact that the drug is not approved as a treatment for COVID.
“By allowing the propagation of false and societally harmful assertions, Spotify is enabling its hosted media to damage public trust in scientific research and sow doubt in the credibility of data-driven guidance offered by medical professionals,” the doctors and medical workers wrote.
“We are calling on Spotify to take action against the mass-misinformation events which continue to occur on its platform,” they continued. “With an estimated 11 million listeners per episode, JRE is the world’s largest podcast and has tremendous influence. Though Spotify has a responsibility to mitigate the spread of misinformation on its platform, the company presently has no misinformation policy.”
Rolling Stone was the first outlet to report on the letter from the medical professionals. Dr. Katrine Wallace, an epidemiologist at the University of Illinois Chicago, was among the signees. She told the magazine that Rogan is “a menace to public health.”
“These are fringe ideas not backed in science, and having it on a huge platform makes it seem there are two sides to this issue,” she said. “And there are really not.”
Spotify had not responded to the letter as of Thursday.
See what others are saying: (Rolling Stone) (Deadline) (Insider)
Data Shows Omicron May be Peaking in the U.S.
In some cities that were first hit by the surge, new cases are starting to flatten and decline.
New Cases Flattening
After weeks of recording-breaking cases driven by the highly infectious omicron variant, public health officials say that new COVID infections seem to be slowing in the parts of the country that were hit the hardest earlier on.
Following a more than twentyfold rise in December, cases in New York City have flattened out in recent days.
New infections have even begun to fall slightly in some states, like Maryland and New Jersey. In Boston, the levels of COVID in wastewater — which has been a top indicator of case trends in the past — have dropped by nearly 40% since the first of the year.
Overall, federal data has shown a steep decline in COVID-related emergency room visits in the Northeast, and the rest of the country appears to be following a similar track.
Data from other countries signals the potential for a steep decline in cases following the swift and unprecedented surge.
According to figures from South Africa, where the variant was first detected, cases rose at an incredibly shocking rate for about a month but peaked quickly in mid-December. Since then, new infections have plummeted by around 70%.
In the U.K., which has typically been a map for how U.S. cases will trend, infections are also beginning to fall after peaking around New Year’s and then flattening for about a week.
Despite these recent trends, experts say it is still too early to say if cases in the U.S. will decline as rapidly as they did in South Africa and the parts of the U.K. that were first hit.
While new infections may seem to be peaking in the cities that saw the first surges, caseloads continue to climb in most parts of the country.
Meanwhile, hospitals are overwhelmed and health resources are still strained because of the high volume of cases hitting all at once.