- 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)
Catholic School Expels Students After Discovering Mother’s OnlyFans Account
- Crystal Jackson, a California mother of three, said her boys were expelled from their Catholic school after other parents notified administrators of her OnlyFans account.
- Jackson, who started the account to boost her confidence and rekindle her relationship with her husband, said she only posts pinup-style photos in lingerie, not pornography.
- Now, she’s speaking out against the intense harassment she’s faced from parents in her community and has criticized the school’s decision to punish her children.
- She also said the school is working to update its handbook to include a rule that “any parent who is involved in a site or blog that goes against teachings of the church and school philosophy must be removed.”
Mother’s OnlyFans Account Draws Criticism
A mother in Sacramento, California says her three boys were expelled from their Catholic school after administrators discovered her OnlyFans account.
That mother is Crystal Jackson, who joined the site in 2019 to spice up her struggling relationship with her husband of 14 years, Chris.
Jackson says she does not post pornography on her account. Instead, she posts pinup-style photos in lingerie and includes “sexy stories” that play up the image of what she and Chris call “the mom next door.”
The account started as a secret between the two of them, but it has since become a huge success, bringing in over $150,000 a month along with hundreds of thousands of social media followers.
While the new venture has also brought her a boost of joy and self-confidence, her growing popularity on the platform eventually caught the attention of parents at Sacred Heart Parish School.
According to several interviews Crystal has given to media outlets, parents were relentlessly urging that her sons be kicked out of school.
They began harassing her with texts and voicemails bullying her and insulting her family. At one point, she says a group of mothers even printed out her OnlyFans photos and sent them anonymously in a packet to the school principal.
Some also reported her to their local priest and bishop and created a Facebook group to gossip about her family.
School Expels Mother’s Three Sons
But the issue escalated Sunday when the school sent her a letter notifying her of its decision.
“Your apparent quest for high-profile controversy in support of your adult website is in direct conflict with what we hope to impart to our students and is directly opposed to the policies laid out in our Parent/Student Handbook,” it read.
“We therefore require that you find another school for your children and have no further association with ours.”
Now, she says the school is working to update their handbook to include a rule that says: “Any parent who is involved in a site or blog that goes against teachings of the church and school philosophy must be removed.”
Crystal has continued to speak out against the school’s decision, telling People Magazine that her 8, 10, and 12 years old are good kids who are only being hurt by the school’s actions.
“Take me down, that’s fine, but leave my kids out of this,” she said.
“I didn’t want to be put out there, but at some point, I have to stand up and say I can’t take it anymore because this behavior is horrible,” she added.
Crystal noted that she was hoping to put her kids back in Catholic school but says she and her husband will likely have to put them in public school.
“They won’t allow them in this diocese, and is this really the place for them to be?” she said. “It’s clear that they said we don’t want you.”
“In the year 2021, here we are, trying to bring a woman down for her choices and what she does with her husband,” Crystal added. “It’s body shaming and bullying all encompassed into one and it’s such a double standard and disturbing.”
For now, she’s just hoping the judgment and harassment in her community will stop. “I’m still the same Crystal I was, like, two years ago, a year ago, when we had coffee, before you knew this.“
Nearly 9 Million Are Without Water in Texas, Some Face Electric Bills up To $17,000
- More than 8.8 million people in Texas remained under boil water notices Monday, and over 120,000 had no water service at all.
- Gov. Greg Abbott (R) said Sunday that the state has distributed around 3.5 million bottles of water, though many of the lines to receive that water were plagued with hours-long waits.
- Meanwhile, power outages in the state have fallen below 20,000, but many Texans are also beginning to receive astronomical electric bills of as much as $17,000.
- Both Abbott and Houston Mayor Sylvester Turner (D) said those prices are not the fault of customers. While some form of forgiveness is likely, no immediate plan has been outlined yet.
Millions Without Water
As of Monday morning, nearly 8.8 million people in Texas are still under boil water notices following last week’s snowstorm. That’s about one out of every three Texans.
Despite being a giant chunk of the state’s population, that figure is actually an improvement from 10 million people on Sunday.
Another 120,000 Texans are still without water service at all.
Gov. Greg Abbott (R) said Sunday almost 3.5 million bottles of water have been distributed across Texas by helicopter, airplane, and truck.
The need for water has been extremely visible. An Austin City Council member shared a video on Twitter Sunday showing a massive line of vehicles waiting for clean water. Some waited for more than an hour before the distribution event began. At another site, she said cars began lining up more than five hours before the event.
Abbott said the state is bringing in more plumbers to increase repair efforts for damaged water systems. Additionally, Abbott said homeowners without insurance could qualify for emergency reimbursement from FEMA.
Meanwhile, one large-scale effort from Rep. Alexandria Ocasio-Cortez (D-NY.) has now raised more than $5 million since first being launched on Thursday. That money will go to several organizations, including the Houston Food Bank, Family Eldercare, Feeding Texas, and the Bridge Homeless Recovery Center.
Texas Electric Bills Soar as High as $17K
All but just under 20,000 Texas homes and businesses have now had their power restored as of Monday morning.
That’s a stark contrast from the more than 4 million that were out of power at one point last week.
While that’s largely good news, many Texans are now beginning to receive sky-high electric bills. That’s especially evident for those whose power stayed on during the storm. In fact, some people have now told multiple media outlets they’re facing bills as high as $17,000.
One 63-year-old Army vet, who was charged $16,752, told The New York Times that his bill was about 70 times higher than normal.
“My savings is gone,” he said. “There’s nothing I can do about it, but it’s broken me.”
As far as why his and others’ eclectic bills are so high, many people in Texas have plans that are directly tied to the wholesale price of electricity. Usually, that helps keep their costs low, but as demand for power surged during last week’s snowstorm, those prices hit astronomical highs.
In a statement on Saturday, Abbott said Texas lawmakers “have a responsibility to protect Texans from spikes in their energy bills that are a result of the severe winter weather and power outages,”
He added that the state Legislature is working “on solutions to help Texas families and ensure they do not get stuck with skyrocketing energy bills.”
In a similar tone, Houston Mayor Sylvester Turner (D) said in an interview with CBS on Sunday, “It’s not the consumers who should assume [these] costs. They are not at fault for what happened this week.”
That said, Turner also laid blame at the feet of the Legislature, calling the current crisis “foreseeable” on the part of lawmakers because a similar snowstorm and outages struck Texas in 2011.
Turner added that, at the time, he was part of the Texas legislature and had filed a bill that would have required the agency overseeing Texas’ grid to “ensure that there was an adequate reserve to prevent blackouts.”
“The leadership in Austin did not give it a hearing,” he said.
While no aid has been fully guaranteed yet, Texas has prevented electric companies from being able to shut off power for people who don’t pay their bills on time.
See what others are saying: (NBC News) (The New York Times) (CNN)
Texans Still Face Broken Pipes, Flooding, and Carbon Monoxide Poisoning as Million Regain Power
- The number of Texans without power fell from 3.3 million on Wednesday to below 500,000 by Thursday.
- Still, millions are currently under a boil advisory, pipes have burst as they begin to thaw, and some individuals have died or been hospitalized because of carbon monoxide poisoning.
- The Federal Emergency Management Agency said Wednesday that it has sent generators, water, and blankets to Texas, adding that it’s working to send additional diesel for generators.
- Gov. Greg Abbott and President Joe Biden have also reportedly discussed the possibility of extra funding for people’s electricity bills, as well as for burst pipes.
Power May Be Back but Problems Persist
Power outages in Texas Thursday morning fell to under 500,000 — down from 3.3 million Wednesday morning.
According to the state’s main grid operator, the Electric Reliability Council of Texas (ERCOT), the remaining outages are largely weather-related and not connected to problems related to forced outages.
While that return of power to millions is significant, Texans are still facing a host of other problems.
For example, there have been numerous reports of carbon monoxide poisoning as people still without power try to keep warm in their cars or through other means. An adult and a child were found dead Tuesday after running their car inside of a garage, prompting Houston police to issue a statement warning that “cars, grills and generators should not be used in or near a building.”
Six children and four adults were rushed to the hospital Wednesday night for carbon monoxide poisoning after setting up grills inside their homes.
Even for those now with power, water has become a major issue. On Wednesday, 7 million Texans were placed on a boil advisory and about 263,000 were without functioning water providers.
One reporter tweeted out a video of people lining up at a park to fill up buckets of water.
“This is not a third world country,” she said. “This is Houston, Texas.”
The Food and Drug Administration and the National Weather Service have even cited melting and boiling snow as an emergency option if people can’t find water elsewhere, an option many have already turned to.
For some, all these problems only seemed to compound in the form of burst pipes. One viral video shows water gushing out of a third-story apartment. Others posted images of their broken pipes and the damage they have caused.
As a result, a number of local media outlets have begun to outline steps people can take once their pipes start to thaw or if they break.
Amid Problems, Aid is Being Distributed
Alongside the overwhelming amount of problems, there has also been a large aid response.
A FEMA spokesperson said Wednesday that the agency has sent 60 “very large” generators to help keep hospitals and other critical infrastructure open.
White House Press Secretary Jen Psaki added that FEMA is preparing to move diesel into Texas to keep that backup power going.
So far, FEMA said it has sent “millions of liters of water” and “tens of thousands” of blankets.
Governor Greg Abbott and President Joe Biden have also reportedly discussed the possibility of extra funding for people’s electricity bills, as well as for burst pipes. That’s because as the storm first hit, electrical demand surged. Since many Texans have plans connected to the wholesale price of electricity, they’re potentially set to be hit with sky-high bills.
Among other issues plaguing Texans is food spoilage; however, that can potentially be reimbursed through renters’ and homeowners’ insurance.
According to an official from the Insurance Council of Texas, “Food coverage is often related to personal property.”
Notably, there are some stipulations depending on individual circumstances and policy. To learn more about how insurance providers accept food spoilage claims, click here.