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U.S. Oil Prices Turned Negative for the First Time Ever. Here’s What You Need to Know

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  • 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.

Storage Problems

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. 

What Now?

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)

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Conservatives Slam Elmo For Getting Vaccinated Against COVID-19 

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While critics accused the muppet of promoting propaganda, CDC data shows the shots are safe and effective.


Elmo Gets Vaccinated 

Conservative politicians expressed outrage on Twitter after the beloved “Sesame Street” character Elmo revealed he got vaccinated against COVID-19 on Tuesday.

The Centers for Disease Control and Prevention recently cleared the way for children between the ages of six months and five years to get vaccinated against the virus. The famous red muppet is three years old, making him finally eligible for the jab. 

In a video shared by “Sesame Street,” Elmo said that he felt “a little pinch, but it was okay.” 

Elmo’s father, Louie, then addressed parents who might be apprehensive about vaccinating their own kids. 

“I had a lot of questions about Elmo getting the COVID vaccine,” he said to the camera. “Was it safe? Was it the right decision? I talked to our pediatrician so I could make the right choice.” 

“I learned that Elmo getting vaccinated is the best way to keep himself, our friends, neighbors, and everyone else healthy and enjoying the things they love,” he continued. 

Republicans Criticize “Sesame Street”

While some praised the video for raising awareness and addressing the concerns parents may have, Sen. Ted Cruz (R-Tx) quickly lambasted the effort.

“Thanks, Sesame Street for saying parents are allowed to have questions,” Cruz tweeted. “You then have Elmo aggressively advocate for vaccinating children UNDER 5. But you cite ZERO scientific evidence for this.”

Despite Cruz’s claim, the CDC has provided ample resources with information on vaccines for children. 

He was not alone in criticizing the video. Harmeet Dhillon, a committeewoman of the Republican National Committee for California, suggested that Elmo would be taking puberty blockers next. 

Other anti-vaxxers claimed Elmo would get myocarditis and accused “Sesame Street” of promoting propaganda.

COVID-19 vaccines have been proven to be both safe and effective against transmission of the virus, but this is not the first time conservatives have turned their anger against a friendly-looking muppet who opted to get the jab. When Big Bird got vaccinated in November, Cruz and other right-wing figures accused the show of brainwashing kids.

Big Bird’s choice to get vaccinated was not a shocker though, clips dating back to 1972 show him getting immunized against the measles. 

See what others are saying: (CNN) (The Hill) (Market Watch)

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Uvalde Puts Police Chief on Leave, Tries to Kick Him Off City Council

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If Pete Arredondo fails to attend two more consecutive city council meetings, then he may be voted out of office.


Police Chief Faces Public Fury

Uvalde School District Police Chief Pete Arredondo was placed on administrative leave Wednesday following revelations that he and his officers did not engage the shooter at Robb Elementary for over an hour despite having adequate weaponry and protection.

Superintendent Hal Harrell, who made the announcement, did not specify whether the leave is paid or unpaid.

Harrell said in a statement that the school district would have waited for an investigation to conclude before making any personnel decisions, but chose to order the administrative leave because it is uncertain how long the investigation will take.

Lieutenant Mike Hernandez, the second in command at the police department, will assume Arredondo’s duties.

In an interview with The Texas Tribune earlier this month, Arredondo said he did not consider himself in charge during the shooting, but law enforcement records reviewed by the outlet indicate that he gave orders at the scene.

Department of Public Safety Director Steve McCraw told state senators on Tuesday that some officers wanted to enter the classrooms harboring the shooter but were stopped by their superiors.

He said officer Ruben Ruiz tried to move forward into the hallway after receiving a call from his wife Eva Mireles, a teacher inside one of the classrooms, telling him she had been shot and was bleeding to death.

Ruiz was detained, had his gun taken away, and was escorted off the scene, according to McCraw. Mireles later died of her wounds.

Calls for Arredondo to resign or be fired have persisted.

Emotions Erupt at City Council

Wednesday’s announcement came one day after the Uvalde City Council held a special meeting in which community members and relatives of victims voiced their anger and demanded accountability.

“Who are you protecting?” Asked Jasmine Cazares, sister of Jackie Cazares, a nine-year-old student who was shot. “Not my sister. The parents? No. You’re too busy putting them in handcuffs.”

Much of the anger was directed toward Arredondo, who was not present at the meeting but was elected to the city council on May 7, just over two weeks before the massacre.

“We are having to beg ya’ll to do something to get this man out of our faces,” said the grandmother of Amerie Jo Garza, a 10-year-old victim. “We can’t see that gunman. That gunman got off easy. We can’t take our frustrations out on that gunman. He’s dead. He’s gone. … Ya’ll need to put yourselves in our shoes, and don’t say that none of ya’ll have, because I guarantee you if any of ya’ll were in our shoes, ya’ll would have been pulling every string that ya’ll have to get this man off the council.”

One woman demanded the council refuse to grant Arredondo the leave of absence he had requested, pointing out that if he fails to attend three consecutive meetings the council can vote him out for abandoning his office.

“What you can do right now is not give him, if he requests it, a leave of absence,” she said. “Don’t give him an out. We don’t want him. We want him out.”

After hearing from the residents, the council voted unanimously not to approve the leave of absence.

On Tuesday, Uvalde’s mayor announced that Robb Elementary is set to be demolished, saying no students or teachers should have to return to it after what happened.

We make it a point to not include the names and pictures of those who may have been seeking attention or infamy and will not link out to websites that might contain such information.

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Texas Public Safety Director Says Police Response to Uvalde Shooting Was An “Abject Failure”

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New footage shows officers prepared to engage the shooter one hour before they entered the classroom.


Seventy-Seven Deadly Minutes

Nearly a month after the mass shooting in Uvalde, Texas that killed 19 children and two teachers, evidence has emerged indicating that police were prepared to engage the shooter within minutes of arriving, but chose to wait over an hour.

The shooting at Robb Elementary began at 11:33 a.m., and within three minutes 11 officers are believed to have entered the school, according to surveillance and body camera footage obtained by KVUE and the Austin American Statesman.

District Police Chief Pete Arredondo reportedly called a landline at the police department at 11:40 a.m. for help.

“It’s an emergency right now,” he said. “We have him in the room. He’s got an AR-15. He’s shot a lot… They need to be outside the building prepared because we don’t have firepower right now. It’s all pistols.”

At 11:52 a.m., however, the footage shows multiple officers inside the school armed with at least two rifles and one ballistic shield.

Law enforcement did not enter the adjoined classrooms to engage the shooter until almost an hour later, at 12:50 p.m. During that time, one officer’s daughter was inside the classrooms and another’s wife, a teacher, reportedly called him to say she was bleeding to death.

Thirty minutes before law enforcement entered the classrooms, the footage shows officers had four ballistic shields in the hallway.

Frustrated Cops Want to Go Inside

Some of the officers felt agitated because they were not allowed to enter the classrooms.

One special agent at the Texas Department of Public Safety arrived about 20 minutes after the shooting started, then immediately asked, “Are there still kids in the classrooms?”

“It is unknown at this time,” another officer replied.

“Ya’ll don’t know if there’s kids in there?” The agent shot back. “If there’s kids in there we need to go in there.”

“Whoever is in charge will determine that,” the other officer responded.

According to an earlier account by Arredondo, he and the other officers tried to open the doors to the classrooms, but found them both locked and waited for a master key to arrive. But surveillance footage suggests that they never tried to open the doors, which a top Texas official has confirmed were never actually locked.

One officer has told reporters that within minutes of the police response, there was a Halligan bar, which firefighters use to break down locked doors, on-site, but it was never used.

At a special State Senate committee hearing Monday, Texas Department of Public Safety Director Steve McCraw called the police response an “abject failure” and “antithetical to everything we’ve learned over the last two decades since the Columbine massacre.”

“The only thing stopping a hallway of dedicated officers from (entering rooms) 111 and 112 was the on-scene commander who decided to place the lives of officers before the lives of children,” he said. “The officers have weapons, the children had none.”

We make it a point to not include the names and pictures of those who may have been seeking attention or infamy and will not link out to websites that might contain such information.

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