More fallout from the Saudi-Russia oil price war as oil futures plunge into historic negative territory.
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In the midst of the current coronavirus pandemic, many have speculated as to the economic impact of the current shutdown. Unemployment has soared past 20%, a level not seen in the US since the Great Depression.
As I have written about before, compounding this problem is turmoil in the Middle East amongst OPEC members. In the middle of March, Saudi Arabia and Russia declared a de facto trade war over oil production, plunging oil prices. This week, another plunge has taken place.
In the early trading hours of April 21st, oil futures on the West Texas Intermediate (WTI) stock plunged to historic lows. At its lowest, oil was trading at –$40 a barrel. Yes, you read that right. For a period of time, a barrel of oil on that particular market was selling in negative territory.
The West Texas Intermediate benchmark was paying people to take oil off their hands. This is unprecedented in American history. Oil has never traded at this low a price.
Now, this does not mean that gas stations will suddenly begin paying people to take their gas (at least, not yet). Refinement is still an expensive process, and so gasoline will continue to cost something. However, the widespread effects on American and world markets will be significant. With Russia and Saudi Arabia not backing down anytime soon, American oil companies, and the shale industry, in particular, look poised to take significant losses.
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