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.

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.

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.

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?
No, you can’t. The contract for oil traded in the United States is for delivery of oil
at Cushing, Okla., a critical storage hub where lots of oil pipelines converge.

In addition, each contract is for 1,000 barrels of oil, or about five tanker trucks’
worth. Even if you had a place to park five tanker trucks filled with oil, you would
be hard pressed to find a trader willing to sell you a single contract. Most trades
are for many times that amount.

Monday’s abnormal fall in prices was a reminder that the industry — and for that
matter, the world economy — has changed a lot since the last oil crisis. For one,
the United States is now one of the biggest producers in the world, and the
country has in recent years been pumping out crude oil as fast it can.

The steep rise in output has outpaced the world’s need for energy, a problem
that is magnified by the coronavirus.

What’s not known is how long this slowdown will last, as well as the long-term
consequences of an economic recession, and if that will fundamentally change
how much oil the world needs.
單字/片語：
1. benchmark n. 基準
2. decline n. 下降
3. barrel n. 桶
4. plunge n. 暴跌；驟降
5. exacerbate v. 使惡化
6. quirk n. 古怪之處
7. future market 期貨市場
8. collapse v. 下跌
9. devastate v. 摧毀
10. eliminate v. 消除
11. commute n. 通勤
12. run out of vph. 消耗殆盡
13. precipitously adv. 突然地
14. jolt v. 使震驚
15. crude oil n. 原油
16. refinery n. 精煉廠
17. diesel n. 柴油
18. fraction n. 極小的部分
19. tepid adj. 不熱烈的
20. rebound v. 反彈
21. coverage v. 覆蓋
22. abnormal adj. 不正常的
23. steep adj. 急遽的
24. outpace v. 比…更快
25. magnify v. 擴大
26. recession n. 衰退期(經濟)