- 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)
Supreme Court Rejects Third Challenge to Affordable Care Act
In the 7-2 decision, the justices argued the Republican-led states that brought the challenge forth failed to show how the law caused injury and thus had no legal standing.
SCOTUS Issues Opinion on Individual Mandate
The Supreme Court on Thursday struck down the third Republican-led challenge to the Affordable Care Act to ever reach the high court.
The issue at hand was the provision of the law, commonly known as Obamacare, that requires people to either purchase health insurance or pay a tax penalty: the so-called individual mandate.
The individual mandate has been one of the most controversial parts of Obamacare and it has already been before SCOTUS, which upheld the provision in 2012 on the grounds that it amounted to a tax and thus fell under Congress’ taxing power.
However, as part of the sweeping 2017 tax bill, the Republican-held Congress set the penalty for not having health care to $0. As a result, a group of Republican-led states headed by Texas sued, arguing that because their GOP colleagues made the mandate zero dollars, it no longer raised revenues and could not be considered a tax, thus making it unconstitutional.
The states also argued that the individual mandate is such a key part of Obamacare that it could not be separated without getting rid of the entire law.
The Supreme Court, however, rejected that argument in a 7-2 decision, with Justices Samuel Alito and Neil Gorsuch dissenting.
Majority Opinion Finds No Injury
In the majority decision, Justice Stephen Breyer wrote that the Republican states had no grounds to sue because they could not show how they were harmed by their own colleagues zeroing out the penalty.
“There is no possible government action that is causally connected to the plaintiffs’ injury — the costs of purchasing health insurance,” he wrote, adding that the states “have not demonstrated that an unenforceable mandate will cause their residents to enroll in valuable benefits programs that they would otherwise forgo.”
Breyer also argued that because of this, the court did not need to decide on the broader issue of whether the 2017 tax bill rendered the individual mandate unconstitutional and if that provision could be separated from the ACA.
The highly anticipated decision will officially keep Obamacare as the law of the land, ensuring that the roughly 20 million people enrolled still have health insurance. While there may be other challenges to the law hard-fought by conservatives, this latest ruling sends a key signal about the limits of the Republican efforts to achieve their agenda through the high court, even with the strong conservative majority.
While the court has now struck down challenges to Obamacare three times, Thursday’s decision marked the largest margin of victory of all three challenges to the ACA.
For now, the ACA appears to be fairly insulated from legal challenges, though it will still likely face more. In a tweet following the SCOTUS decision, Texas Attorney General Ken Paxton (R) vowed to keep fighting Obamacare, adding that the individual mandate “was unconstitutional when it was enacted and it is still unconstitutional.”
See what others are saying: (Axios) (The Washington Post) (The Associated Press)
Utah Student With Down Syndrome Left Out of Cheer Squad’s Yearbook Photo
The move marks the second time in three years that Morgyn Arnold has been left out of the school’s yearbook. Two years ago, it failed to include her in the class list.
Two Photos Take, One Without Morgyn Arnold
A Utah school has apologized after a student with Down syndrome at Shoreline Junior High was excluded from her cheerleading squad’s yearbook photo.
The squad took two official team portraits this year. The first included 14-year-old Morgyn Arnold, who had been working as the team manager but attended practices and cheered alongside her other teammates at every home game. The second imsgr did not include her and ended up being the photo the school used across social media and in its yearbook.
Arnold was heartbroken by the decision and her family believed it was made because of her disability.
In social media posts about the move, Arnold’s sister, Jordyn Poll, noted that Arnold “spent hours learning dances, showing up to games, and cheering on her school and friends but was left out.”
“I hope that no one ever has to experience the heartbreak that comes when the person they love comes home from school devastated and shows them that they’re not in the picture with their team,” she continued.
According to The Salt Lake Tribune, Poll also said this marked the second time in three years that her sister has been left out of the yearbook. Two years ago, the school failed to include her in the class list.
School Apologizes After Backlash
After Poll’s public call out picked up attention, the school said it was “deeply saddened by the mistake.”
“Apologies have been made to the family, and we sincerely apologize to all others impacted by this error,” it added. “We are continuing to look at what has occurred, and to improve our practice.”
The district issued a similar statement, claiming it was looking into why this occurred to make sure it doesn’t happen again.
But Poll said this isn’t the same response her family received when they initially contacted school administrators. Instead, Poll told the Tribune that an employee at the school “blatantly said they didn’t know what we were expecting of them and there was nothing they could do.”
The school has since contacted them again “to make the situation right.”
Meanwhile, Poll stressed that her sister’s teammates had nothing to do with the decision, defending the girls as amazing friends who have done everything to make Arnold feel included.
In fact, they too were disappointed to see that she was not featured in the image or even named as a member of the team in the yearbook.
Arnold’s family decided to speak up about the issue so that this school and others can improve the ways they interact with and include students with disabilities. Different forms of exclusion happen at schools across the country, and this story has prompted other parents of kids with disabilities to share similar experiences.
This kind of thing happens all the time. I can't count the number of times our son has been excluded, or nearly excluded, from events and pictures and related social activities in his 8 years of school. I know this fury.— David M. Perry (@Lollardfish) June 16, 2021
A staff attorney at the Disability Law Center of Utah told the Tribune that it receives about 4,000 complaints each year. Some complaints stemmed from students with disabilities being separated into other classrooms without their peers. Others include name-calling or not allowing students on a team or in a club.
Thankfully, Arnold has not let this situation bring her down. According to her family, she has already forgiven everyone involved and plans to continue cheering alongside her friends.
See what others are saying: (The New York Times) (The Salt Lake Tribune) (NBC News)
Ex-Shake Shack Manager Sues NYPD Over False Milkshake Poisoning Allegations
The former manager is accusing the police department and its unions of false arrest and defamation relating to the viral incident last summer.
Former Shack Shack Employee Sues One Year Later
The former manager of a New York City Shake Shack restaurant who was falsely accused of poisoning several law enforcement officers’ milkshakes last summer is now suing the city’s police department, its unions, and individual officers.
On June 15, 2020, three officers monitoring the anti-racism protests in Lower Manhattan entered a Shake Shack location for milkshakes, which they later claimed had been poisoned, likely by bleach.
By the end of the night, investigators determined that no one had tampered with the drinks, and the New York Police Department declared there was “no criminality.” Police later said the officers were possibly sickened by a cleaning solution that had not been properly cleaned out of the machines, though Shake Shack claimed it did not find leaks of any foreign substances.
Before that lack of criminality was determined and while the inquiry was ongoing, the police unions and their leaders accused the Shake Shack workers of launching a targeted attack in a series of tweets, which were then shared and discussed widely on social media by prominent conservatives.
The resulting outcome was widespread condemnation and deleting of tweets. Now, almost exactly a year later, the former manager of that Shake Shack, Marcus Gilliam, has accused the parties involved of false arrest and defamation.
According to his lawsuit, the three officers — who are referred to as Officers Strawberry Shake, Vanilla Shake, and Cherry Shake — ordered the drinks via mobile app, meaning the employees could not have known cops placed the order.
Additionally, the documents state the order was “already packaged and waiting for pickup” when the officers arrived, making it impossible for Gilliam or any other employee to have added anything to the shakes when they saw the officers come in to claim them.
After the officers complained about the taste of the milkshakes and threw them out, Gilliam said he apologized and offered them vouchers for free replacements, which they accepted. However, they still told their Sergeant that Gilliam had put a “toxic substance” in their drinks, even though they had disposed of any evidence.
Claims of Wrongful Detainment
The court documents go on to say that another officer arrived and detained the employees, who cooperated with the officer’s investigation. That process included interviews, searches, and tests, which showed no evidence of bleach or other toxins.
The NYPD also conducted a review of security footage, which independently determined that none of the employees put any kind of toxic substances in the officer’s drinks.
Despite all that, and even after the three officers were released from a hospital “without ever showing symptoms,” the NYPD still arrested Gilliam and brought him into the precinct, the suit stated.
Once in the precinct, the former manager was allegedly “interrogated for approximately one to two hours” and detained for around three hours, putting the total time he was detained by police in both the store and the precinct at approximately five to six hours.
Gilliam’s attorney is arguing that the officers had no probable cause or warrants for his arrest. An arrest that the lawsuit says caused him to suffer “emotional and psychological damages and damage to his reputation,” as well as economic damages from legal fees and missed wages, for which he is seeking both punitive and monetary damages.
None of the defendants have responded to requests for comment from the media.