- 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)
Kathy Griffin, Ethan Klein, More Suspended From Twitter Over Elon Musk Impersonations
Many have pretended to be Musk in an attempt to highlight the potential issues paid-for verifications could cause on the platform.
Musk Takes on Impersonations
Comedian Kathy Griffin and internet personality Ethan Klein are among the many Twitter users that have been permanently suspended for impersonating the platform’s new CEO, Elon Musk.
Impersonation has long been against Twitter’s rules, but on Sunday, the billionaire took the policy a step further by announcing that “any Twitter handles engaging in impersonation without clearly specifying ‘parody’ will be permanently suspended.”
“Previously, we issued a warning before suspension, but now that we are rolling out widespread verification, there will be no warning,” Musk explained. “This will be clearly identified as a condition for signing up to Twitter Blue.”
Musk also said that any user who changes their name will temporarily lose their verification check mark.
The announcement came as many verified users began mocking Musk by changing their name and photo to match his, then tweeting jokes that were either absurd or out of character for the business mogul. Many did this to protest Musk’s plan to charge an $8 monthly subscription fee that would allow any Twitter user to become verified.
Klein was one of many who changed his name to “Elon Musk” and made a photo of the CEO his profile image. The podcast host sent out several jokes, including one referencing the increased use of the N-word on the platform since Musk’s takeover, and another referencing Jeffrey Epstein.
“Even though Jeffrey Epstein committed horrible crimes, I do still miss him on nights like this for his warmth and camaraderie. Rest In Peace old Friend,” he wrote.
His account was quickly banned, but Klein defended himself on TikTok, arguing that both his cover photo and bio labeled his account as “parody” and therefore should be acceptable under Musk’s guidelines.
“What more do you want from me?” he asked. “Comedy is dead. And Elon Musk dug the grave.”
Protests of Musk’s Twitter Control
For her part, Griffin likewise tweeted while masquerading as Musk, writing that after “spirited discussion with the females in my life, I’ve decided that voting blue for their choice is only right.”
Musk joked that she was actually “suspended for impersonating a comedian” and added that she can have her account back if she pays for the $8 subscription. Griffin, however, found another way around the ban.
The comedian logged into her late mother’s Twitter account and began using the hashtag #FreeKathy while calling out Musk.
“Mad Men” actor Rich Sommer and podcaster Griffin Newman have also had their accounts suspended for tweeting as Musk. Other celebrities, including TV producer Shonda Rhimes, musician Sara Bareilles, and model Gigi Hadid have protested Musk’s Twitter reign by leaving the platform altogether.
“For a long time, but especially with its new leadership, it’s becoming more and more of a cesspool of hate & bigotry, and it’s not a place I want to be a part of,” Hadid wrote on Instagram over the weekend.
AOC Says Twitter Notifications “Conveniently” Disabled After Criticizing Musk
“What’s good? Doesn’t seem very free speechy to me,” she tweeted at the new CEO.
AOC Vs. Elon Musk
Rep. Alexandria Ocasio-Cortez (D-NY) said several of her Twitter features are “conveniently not working” after feuding with the platform’s new owner, billionaire Elon Musk.
Ocasio-Cortez has never been shy about her views on Musk. After he officially took charge of Twitter last week, the congresswoman began criticizing his new proposals for the social networking site, specifically his plan to charge an $8 subscription fee for verification.
“Lmao at a billionaire earnestly trying to sell people on the idea that ‘free speech’ is actually a $8/mo subscription plan,” she wrote on Tuesday.
“Your feedback is appreciated, now pay $8,” Musk replied the following day.
Around an hour later, the business mogul sent another tweet appearing to call Ocasio-Cortez out for selling $58 sweatshirts.
“Proud of this and always will be,” she shot back. “My workers are union, make a living wage, have full healthcare, and aren’t subject to racist treatment in their workplaces. Items are made in USA. Team AOC honors and respects working people. You should try it sometime instead of union-busting.”
In a follow-up tweet, she noted that proceeds go to community organizing programs, including one that tutors students who are falling behind because of COVID-19.
AOC’s Mentions Not Working
On Wednesday evening, just hours after her back-and-forth with Musk, Ocasio-Cortez told her followers that her “Twitter mentions/notifications conveniently aren’t working tonight.”
“I was informed via text that I seem to have gotten under a certain billionaire’s skin,” she added. “Just a reminder that money will never [buy] your way out of insecurity, folks.”
The issue seemingly continued into Thursday morning when the Democrat tweeted a screenshot of her notifications page, which loaded no results.
“Why should people pay $8 just for their app to get bricked when they say something you don’t like?” she tweeted at Musk. “This is what my app has looked like ever since my tweet upset you yesterday. What’s good? Doesn’t seem very free speechy to me.”
Musk has repeatedly claimed that one of his primary motives to buy Twitter was to protect free speech. Once taking the reigns as CEO, though, he did say he would start a content moderation council and make decisions jointly with them.
South Carolina County Votes Against Moving LGBTQ+ Friendly Books Away from Children’s Section
Efforts to limit LGBTQ+ content in libraries first began over the summer.
Attempts to Restrict LGBTQ+ Displays
The county council in Greenville County, South Carolina this week voted against discussing a resolution that would move all books “promoting sexuality” to the adult section.
This resolution is the culmination of months of turmoil in Greenville County. In June, libraries in the county removed Pride displays at the direction of library officials. Then in September, the county’s Republican Party executive board passed a resolution to call on the County Council to restrict access to books with LGBTQ+ themes and characters.
The resolution was proposed by Joe Dill, an outgoing council member, as well as a member of the county’s Republican Party executive board. It proposed the council “officially order that no books or content, including digital copies or online accessible materials, promoting sexuality be allowed in the Children’s Sections of our public libraries.”
However, the resolution required the council to suspend its regular rules in order to discuss it as it was not submitted to the council via committee. The final vote was 9 to 3 against the suspension of the rules and effectively killed the resolution.
Those that voted against it viewed the resolution as an overreach.
“We just do not believe that’s our job to get involved in the library’s business,” Council member Ennis Fett said to a local news outlet. “We appoint a board. We can not set a precedent of micromanaging the library board, because if we do that, then, we will be micromanaging all boards and commissions that we appoint.”
Although the council decided not to get involved, the library still has the final decision to make regarding these books. Their meeting to discuss the matter is scheduled for December 5.