US oil prices crashed below $0 a barrel on Monday and spiraled into negative territory for the first time ever. In a historic crash, oil futures opened at their lowest level since 1983.
This past month, experts warned oil prices could dip into negative territory and the fears became reality for numerous companies ready to ship crude oil to refineries. Negative oil prices effectively mean companies have started paying customers to take the commodity off their hands. Why would this happen? We’re running out of places to store oil as demand dries up amid the coronavirus pandemic and those fears finally bubbled to the surface on Monday.
With hundreds of millions of people around the world staying at home to stop the spread of COVID-19, travel by car or plane is nearly nonexistent. Factor in a major lag in manufacturing and other economic activity that requires oil and the reasons for the dramatic crash become apparent. For those still traveling, it’s not uncommon to see gas prices under $1 per gallon at stations across the US these days, though it’s left those businesses hurting.
A previous crash came in March just as the coronavirus started to zap demand, but also as Saudi Arabia began dumping incredibly cheap oil on the market in a price war with Russia. While the OPEC Plus countries reached an agreement to slash production by more than 9 million barrels of oil per day, the latest crash shows it won’t be enough to overcome the surplus of oil currently out there today.