https://nyti.

ms/2VQGGIo

What Negative Oil Prices Mean and How the Impact Could
Last
The strange thing that happened in oil markets does not mean you can make money storing
oil, or that gasoline will cost nothing.

By Vikas Bajaj

April 22, 2020, 8:10 a.m. ET

A main benchmark for the price of oil fell negative for the first time ever this week. The
decline —  more than 300 percent in daily trading — raised fresh questions about the
damage the coronavirus is having on the global economy.

What does it mean for oil prices to be negative?

A benchmark price for a barrel of oil to be delivered next month fell to -$37.63 on Monday,
which means that sellers would have to pay someone that much to take it off their hands.

But that historic plunge was exacerbated by a quirk in how the oil markets work.
The negative price concerned only contracts for delivery of barrels in May that are traded
on so-called futures markets. At the same time trading happens for May deliveries, people
trade on contracts ending in June, in July and so on.

Demand for oil has collapsed in recent weeks as the coronavirus pandemic has devastated
practically all corners of the economy, eliminating much of the need for fuel to ship goods,
ride on airplanes or commute to work. Without a use for it, the world’s biggest producers
— the United States is high on that list — are running out of places to store all the oil that
companies have continued to pump out of the ground.

As a result, traders this week were willing to pay to get rid of oil rather than figure out how
to keep storing it. The May contracts that fell so much ended on Tuesday. (The price of the
June contract is still in positive territory, though it has fallen a lot in recent weeks, too.)

OK, then, why am I still paying for gas at the pump?

The price of gas has been precipitously falling around the United States in the last few
weeks as the oil industry has been jolted. The national average price of gas was $1.81 as of
Monday, a $1.03 drop from a year ago.
 Latest Updates: Markets and Business

• Nearly 100 public companies got millions in small business loans.

• Sentiment shifts again, and stocks and oil prices rebound from waves of selling.

• The plan to sell Victoriaʼs Secret to a private equity investor may be on the ropes.

See more updates Updated 13m ago

More live coverage: Global U.S. New York

But crude oil is only the raw material from which refineries make gasoline, diesel, jet fuel
and other products. And the price of crude — even if it’s negative right now — accounts for
only a fraction of the cost of the gasoline or diesel you put in your car or truck, according to
the Energy Information Administration.

It costs companies like Exxon Mobil and Royal Dutch Shell, which employ tens of thousands
of people around the world, a lot of money to refine oil and transport it to gas stations. In
addition, federal, state and local taxes account for about one-fifth of what you pay at the
pump in the United States. Taxes can make up a much greater share of the price in many
European and Asian countries.

Will the price of oil stay or become negative again?

This had never happened before, and experts do not expect prices to stay negative for days
or weeks. Demand for oil is likely to remain tepid for months because few experts believe
the economy will quickly rebound to where it was before the pandemic.

Sign up to receive our daily Coronavirus Briefing, an informed guide

Sign Up
with the latest developments and expert advice.

But the low prices will also put pressure on oil companies and countries like Saudi Arabia
and Russia, huge producers, to pump less oil because they themselves will run out of room
to store it. That should, over time, help lift prices — or at least slow down declines.

Can I buy barrels of oil and store them, say, in my backyard and make
money?
 Show Full Article

The Coronavirus Outbreak

Frequently Asked Questions and Advice

Updated April 11, 2020

• When will this end?

This is a difficult question, because a lot depends on how well the virus is
contained. A better question might be: “How will we know when to reopen the
country?” In an American Enterprise Institute report, Scott Gottlieb, Caitlin
Rivers, Mark B. McClellan, Lauren Silvis and Crystal Watson staked out four
goal posts for recovery: Hospitals in the state must be able to safely treat all
patients requiring hospitalization, without resorting to crisis standards of care;
the state needs to be able to at least test everyone who has symptoms; the
state is able to conduct monitoring of confirmed cases and contacts; and there
must be a sustained reduction in cases for at least 14 days.

READ MORE