Publisher's Note: One of the most significant things you can do to promote Liberty is to support our mission. Please make your gift to the 2022 Independence Day Campaign today. Thank you! —Mark Alexander, Publisher

Thomas Gallatin / April 22, 2020

Bottom Falls Out of Oil Market

The price of a barrel of oil actually fell below zero dollars. What happened?

“Oil falls below zero dollars a barrel,” blared headlines across the country on Tuesday, as the price of oil plunged to record lows, even reaching “negative” territory in some cases. It began earlier this year with a price battle between Saudi Arabia and Russia, both of whom ramped up production to undercut the other (and the U.S.). Then, with the world economy in the throes of the China Virus shutdown, demand for oil plummeted. According to the American Petroleum Institute’s calculations, current global oil production is 100 million barrels a day, but demand has slipped to just 70 million barrels, creating a massive oversupply that sent prices crashing.

However, the actual price of oil is not less than zero dollars; rather, the price has everything to do with available storage. The Wall Street Journal explains, “Oil traders are storing crude in the expectation that they can get a higher price later, but storage capacity is running out. Traders who are long in the market are having trouble finding storage for delivery, so they have to sell at a firesale price. Meanwhile, the oil price for contracts due in June was $21.40 on Monday, and for August it was $29.15.”

With the U.S. economy in a pandemic-induced hold, the nation’s storage capacity for oil is quickly filling up. America’s storage capacity is around 825 million barrels and, the Journal reports, “Actual storage has never previously exceeded 500 million barrels. Now there are fewer than 100 million barrels of storage left.”

Meanwhile, there’s the asinine celebratory sentiments of socialist Rep. Alexandria Ocasio-Cortez, who invoked her inner Marx: “You absolutely love to see it,” she crowed. “This along with record low interest rates means it’s the right time for a worker-led, mass investment in green infrastructure to save our planet.” She may have deleted her tone-deaf tweet, but, once again, AOC and her degree in economics is a testament to America’s failing system of higher education.

As economist Stephen Moore aptly put it, “Almost no one (other than radical environmentalists) favors decapitating an industry that has made America an energy powerhouse, created as many as 5 million new jobs, and almost single-handedly pulled our nation out of the 2008 to 2009 recession.” Few but AOC, anyway. She and her fellow ecofascists won’t shed any tears over the massive job losses in the oil industry that are already beginning.

There’s hope that the deal President Donald Trump negotiated with Saudi Arabia and Russia will help to shore up falling prices. Yet that agreement doesn’t go into effect until May 1. And even with that deal in place, as long as the U.S. economy is stuck in shutdown mode, it will likely be months before demand catches up with production. This reality has some calling for tariffs to be levied on foreign oil in an effort to shore up U.S. oil companies. That’s easier said than done, however, as the vast majority of U.S. refineries are equipped for refining foreign oil rather than the American shale oil. Retrofitting refineries will take time and cost companies tens of millions, effectively erasing any immediate gains. On top of that, raising tariffs on foreign oil would hurt American consumers.

There are no easy solutions, but the best options are to slash royalty payments and for oil nations to agree to significantly cut back on production until demand increases again.

Start a conversation using these share links:

Who We Are

The Patriot Post is a highly acclaimed weekday digest of news analysis, policy and opinion written from the heartland — as opposed to the MSM’s ubiquitous Beltway echo chambers — for grassroots leaders nationwide. More

What We Offer

On the Web

We provide solid conservative perspective on the most important issues, including analysis, opinion columns, headline summaries, memes, cartoons and much more.

Via Email

Choose our full-length Digest or our quick-reading Snapshot for a summary of important news. We also offer Cartoons & Memes on Monday and Alexander’s column on Wednesday.

Our Mission

The Patriot Post is steadfast in our mission to extend the endowment of Liberty to the next generation by advocating for individual rights and responsibilities, supporting the restoration of constitutional limits on government and the judiciary, and promoting free enterprise, national defense and traditional American values. We are a rock-solid conservative touchstone for the expanding ranks of grassroots Americans Patriots from all walks of life. Our mission and operation budgets are not financed by any political or special interest groups, and to protect our editorial integrity, we accept no advertising. We are sustained solely by you. Please support The Patriot Fund today!

★ PUBLIUS ★

“Our cause is noble; it is the cause of mankind!” —George Washington

The Patriot Post is protected speech, as enumerated in the First Amendment and enforced by the Second Amendment of the Constitution of the United States of America, in accordance with the endowed and unalienable Rights of All Mankind.

Copyright © 2022 The Patriot Post. All Rights Reserved.

The Patriot Post does not support Internet Explorer. We recommend installing the latest version of Microsoft Edge, Mozilla Firefox, or Google Chrome.