21 April, 2020
 Posted by Ac2ality

Why US oil prices fell to historic lows, explained

Take my oil, please.  US oil prices turned negative for the first time ever. In other words, demand was so low that oil producers were actually paying to have oil taken off their hands.

The process. 

Crude oil is extracted, and it’s taken to refineries to convert it into gasoline. Reminder. Crude oil is not worth anything, and until it is not taken to the refineries it has to be stored.

The fall: supply vs demand.

With many Americans under stay-at-home orders (think: coronavirus), people aren’t exactly driving or flying very much. This means there is lot of oil that no one wants, and as a result, places to store it are getting full.

Why don’t they cut oil production?

It’s not that simple. The reduction must be agreed in advance with clients and OPEC (other oil-producing countries). Also, closing an oil and gas reservoir involves technical challenges that can compromise the reservoir itself.

Related Articles:

The Saudi Arabia-Russia oil war, explained.

One comment on “Why US oil prices fell to historic lows, explained”

  1. Miguel Varela.

    Falta informaackon. La noga ez buena pero elemental.

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