12 ms·

One corner of U.S. oil market has already seen negative prices

88 points by Reedx 7y ago

codingslave 7y ago
Let the peak oil hysteria from the 80s and 90s be a reminder to everyone here how fallible common beliefs are among the population.
- eloff 7y ago
  Peak oil theory is sound economics. We now have sufficient proven and suspected reserves that we expect that demand will tail off before supply does, so we expect that we won't have a supply crunch. But it could have possibly gone that way if the Earth had fewer extractable reserves or if humans had been less innovative in finding new methods of extraction. It really just comes down to whether demand or supply tails off first.
  - jessaustin 7y ago
    Okay, well it would still be nice if we could tell ahead of time which pronouncements of "sound economics" are valid and which are total bunk. Even at the time that Peakists and oil investors (were these really different groups?) were most noisome, lots of more sober people could see the bunk.
    - eloff 7y ago
      It's basic supply and demand, which is microencomics, formally known as the non-bunk part of economics. Macroeconomics is where the bunk lives, so it's quite easy to tell - only slightly joking. I don't think anyone on either side really knew with oil how things would go. Hindsight is 20-20, and one of the two camps was going to win with 100% certainty. It's not fully decided yet mind you, peak oil could still happen if people keep increasing demand for it instead of weaning away from fossil fuels. But I don't think that scenario is likely at all.
      - jessaustin 7y ago
        I don't recall any of the original Peakist manifestos including your very reasonable caveats about hindsight and uncertainty? Really though, this is why I sort of stopped worrying about peak oil about a day after I was first exposed to the idea. It was a very absolutist disastrous sea-change phase-transition sort of scenario, and those are relatively rare in real life. (Well, at some level they are very common: everyone is conceived at some time and dies at another. These details disappear in aggregate.) It's much more common for equilibria that have been stable over decades to continue that stability, even if at slightly different locations. Lots of things are more expensive in our modern times than they used to be; somehow society has survived.
      - woodandsteel 7y ago
        It became a moot argument due to the rise of renewable energy and concern about global climate change. I really doubt that is going to change for many decades.
  - Majromax 7y ago
    > we expect that demand will tail off before supply does While I agree with your "sound economics" conclusion, I think that tapering demand was not part of the "peak oil" modeling. The underlying assumptions involve no particular shift to the oil demand curve, whereas with improvements to other energy technologies (renewable energy, but also natural gas) we find that oil demanded per unit output at a fixed oil price appears to decrease with time. (The covid-related demand shock is of course not helping to bolster this curve.)
  - credit_guy 7y ago
    > Peak oil theory is sound economics. Why is oil special? Why not peak iron, aluminum, concrete, NaCl, or any or the myriad other things we consume? All of them are in finite quantities, not only oil. Earth has a finite mass after all.
    - jessaustin 7y ago
      Haha, ISTR something on HN within the last year about "peak sand"[0]. All physical substances are vulnerable to this silliness: we're nowhere near "peak peak". [0] https://news.ycombinator.com/item?id=20363875 https://news.ycombinator.com/item?id=20363875
    - thechao 7y ago
      Iron, aluminum, and salt are extremely common and very much renewable. Concrete is looking like it might be sand limited, and of limited renewability; there's already concern over our long-term ability to make concrete. Oil, on the other hand, we literally burn & convert into C02, and other fun stuff. Once we use it, it's pretty much gone.
      - throwaway373438 7y ago
        > Once we use it, it's pretty much gone. Oil is as renewable as any other renewable resource. It's made from plants. We're only at risk of running out of cheap crude mined from the earth with a positive net energy return at a low price. We aren't ever at risk of not being able to have oil. It's an open question whether our access to cheap fossil fuel will outlast our demand for it.
        deleted 7y ago
        [deleted]
        BoiledCabbage 7y ago
        > We're only at risk of running out of cheap crude mined from the earth with a positive net energy return at a low price. We aren't ever at risk of not being able to have oil. A: Our business is running out of money we can no longer get any loans at any interest rate. B: False. You're not running out of money or access to loans. You can still get loans as long as you're willing to put down more collateral in cash upfront than the amount you're borrowing. I think see why you used a throwaway for this insight.
  - codingslave 7y ago
    No. There is enough oil on the planet for another 500 years. There is no shortage.
    - woodandsteel 7y ago
      >There is enough oil on the planet for another 500 years Math please? And remember when people talk about peak oil, they mean oil that is cheap enough to be of economic use.
- polotics 7y ago
  This statement of yours shows a deep misunderstanding of the relationship between price and availability as it pertains to oil: less availability only implies higher price in a very local way and for very short time spans. Oil is too vital to the global economy, it's not competing against any other energy source at its scale and mode of usage, and it's availability conditions enough of all economic activity, that availability conditions affordability for all economic actors. There is therefore no correlation between availability (production volumes) and prices for oil.
jonfw 7y ago
Article is stuck behind paywall for me
- jfk13 7y ago
  So if you want to read it, perhaps it's time to consider paying? (Alternatively, private browsing mode might work.)
  - Bud 7y ago
    More to the point, it's better to post links that are viewable by the full audience, where possible.
  - randallsquared 7y ago
    Paying providers directly either means micropayments or committing to reading enough of that specific news source to get a non-micropayment-sized amount of value from it. No one has really cracked micropayments in a way that has caught on, yet, and the model of depending on a single source for a majority of news has gone the way of print newspapers. Bloomberg, NYT, WashPo, the Economist, and other such places need to figure out how to provide value commensurate with the money they charge, or else figure out how to exist in a world where one of "their" readers still visits dozens or hundreds of other such outlets a month. > Try 3 months for -$105- $6. Cancel anytime. The 105 is just a joke, and even $2 a month is very high, considering there'd be similar payments to 20+ other such outlets.
    - jonfw 7y ago
      exactly. The subscription model only makes sense for loyal readers- which I am not.
  - toss1 7y ago
    I'd actually be happy to pay substantially for a sufficiently broad spectrum of news from multiple providers However, $100-$500 to each one that I want to read >5 articles per month is not sustainable. We need one of two models: Pay maybe $0.20/article, refundable if I don't finish, don't like it (obviously limiting the number of Refund hits/month to prevent abuse) Pay once for a selection of feeds, say $100/quarter, and pick your favorite 5 out of 50, get unlimited reads from that batch and 10/month from the rest. I'd happily sign up for either, but no one publication provides sufficient breadth to support at the demanded price level.
vkou 7y ago
Tar sands oil is now trading at $6.6/barrel. This is going to be a disaster for the Canadian petro-provinces. While much of this price collapse has been driven by OPEC, the COVID-depressed gasoline demand is here to stay for at least a few months.
- eloff 7y ago
  Alberta was already in bad shape before this, with huge sections of Calgary downtown empty, 20% unemployment in rural areas. Now add an oil price collapse and coronavirus shutdown of large parts of the service sector. Very hard times for Alberta ahead. In the oil bust in the first half of the 1980's people would sell their homes for a dollar just to get away from the mortgage because it was completely underwater. I fear we may see those days again in Calgary. I was born there during those days, which I don't remember, but I do recall the stories people told of it while I was growing up.
  - vkou 7y ago
    With the economics of the tar sands, the entire province has been doing the equivalent of margin trading, to make ends meet, for the past two decades. Tiny swings in price either bring a moderate windfall, or utter ruin. It's not a great way to run your economy.
    - dsfyu404ed 7y ago
      >the entire province has been doing the equivalent of margin trading, to make ends meet, for the past two decades. Tiny swings in price either bring a big windfall, or utter ruin. >It's not a great way to run your economy. Sure, but what other way do they have to run their economy? Without monumental government effort to keep prices stable grain (and grain derived products) isn't much better.
      - vkou 7y ago
        Alberta used to be a cattle province[1][2], before the petro-firms trampled all over farmer rights, and imported a million people to work the tar sands/support the people who worked the tar sands. Just because you've destroyed the ring, you can't really go back to the Shire, but Alberta's choices in the 21st century are either a return to agriculture, and mass emigration, or a transition to exporting professional services. [1] Ironically, while the price of oil plummets, the spot price for beef is up 20% since the start of this crisis... Although, the price of beef futures is dropping a bit. [2] Edit: I'm aware that agriculture employs a small number of people (1.5-2% of the population, but so does oil extraction - only 0.3% of the population directly works in the tar sands - everyone else supports them.) Like any other industry, it has a large supporting industry of suppliers, truckers, etc. It's not nearly as lucrative as oil, but it's a living.
nogabebop23 7y ago
Just to put this in perspective, we're talking about one bid for basically land-locked asphalt in a period of essentially zero demand. I don't know what the size/liquidity of the trading market is, but I'd suspect very small. The market price is currently around $2. This is not oil for energy; reading too much into this is like seeing the price for firewood skyrocket and expecting people to freeze to death this winter.
- phaemon 7y ago
  People freeze to death every winter because they can't afford fuel. I have no idea what your analogy is supposed to mean.
  - valuearb 7y ago
    Where?
    - fyfy18 7y ago
      In the UK around 3,000 people die per year because they can't afford fuel costs. https://www.independent.co.uk/news/business/news/cold-weather-uk-winter-deaths-europe-polar-vortex-a8224276.html https://www.independent.co.uk/news/business/news/cold-weathe...
      - valuearb 7y ago
        How? The cost to heat a home is a tiny fraction of the cost of owning a home.
        mirimir 7y ago
        A couple decades ago, we owned an 18th century house in the northeastern US, with some 19th century additions. The mortgage and taxes totaled ~$2.5K per month, and oil heating cost peaked at $500 per month in the winter. It had an historic designation, and insulating it properly would have been impossibly expensive.
twomoretime 7y ago
It's funny that we're technically cheering on a cartel (OPEC) to artificially raise prices for a commodity that the world depends on. Ok maybe not so funny, but it's a conversation worth having, isn't it? Doesn't it imply something severe about free market innefficiencies?
- elgenie 7y ago
  On of the classic ways that oligopoly and monopoly power can be abused is by engaging in temporary price wars to drive any smaller competitors so that prices can later be jacked up and monopoly profits reeled in. That's what's happening here.
  - Robotbeat 7y ago
    If we ignore the regressive effects of (eventual) high energy prices (which are significant! a LOT of people are helped by low gas prices. Popular protest understandably occur when governments eliminate deep fuel subsidies)... ...then the long-term monopoly rents being much higher in terms of total revenue is actually good for the environment and maybe good for humanity in absence of something more rational like a carbon tax. It can act like a Carbon Tax, but with the revenue going to Saudi Arabia or Russia (etc). In other words, non-ideal... But does maybe help electric cars in the very long-term (ignoring the near-term damage to existing electric car makers, and assuming we wouldn't be instituting a carbon tax anyway). Much better would be a local carbon tax with revenues redistributed to counteract any regressive impact while also funding transition to alternatives.
  - twomoretime 7y ago
    Oh no, I don't think so in this case. Putin and SA are the primary belligerents, in which case they may have other geopolitical motivations for playing this game.
jonfw 7y ago
What's the volume being traded at that price? I'll bid -$10 to buy your house, doesn't mean that's what your house is worth.
- frandroid 7y ago
  You might want to avoid paying hefty municipal taxes or another impending viability, at which point paying less than taxes might sound like a cheaper alternative to get rid of the house. Same with these oil producers. There might be too much crude sitting on trucks going to an already-full storage facility, and they need to clear space in order to empty trucks, even if production upstream has already shut down.
- ddebernardy 7y ago
  If someone accepts your -$10 bid the house will totally be worth that by definition. Remember the $1 houses from Detroit a decade ago. They weren't even worth $1 due to the tax liability that came with them, and they didn't sell for that reason.
  - jjeaff 7y ago
    My grandfather bought a $1,000 house years ago, not in the Detroit area, but a similarly blighted area. Immediately after purchasing it, the city started fining and hounding him to get it cleaned up and up to code. He went in to court at one point and asked the judge why he was getting all these notices when it was already the nicest house on the block. The judge's answer was something to the effect of "oh, well they can't afford to fix it up."
  - valuearb 7y ago
    Price is not equal to value. Occasionally prices get silly for irrational reasons.
  - jonfw 7y ago
    Exactly- did anybody accept the negative bid? The article only mentions the bid itself, which makes me think not.
coliveira 7y ago
The US has an oil industry that is completely unreasonable. The whole idea of US oil production is that the price needs to be high enough to support the costs of shale extraction. But their own existence forces the prices down by oversupply. It is an economic time bomb.
- mschuster91 7y ago
  The existence of the US oil industry is not unreasonable. The US needs their own oil supply for military security - without domestic production the US would be subject to Russian and OPEC extortion (which the Russians and OPEC are pointing out at the moment).
- deleted 7y ago
  [deleted]
- dragontamer 7y ago
  Its insurance against OPEC raising prices. Without the shale oil industry, OPEC will just raise prices. With the shale oil industry, OPEC lowers prices to try to wring them out of business. Gotta think big picture and geo-political issues. In isolation, its a negative (especially with such low prices right now). But in the great scheme of oil-independence from OPEC / other oil producing companies, there's a benefit.
  - kevin_thibedeau 7y ago
    OPEC countries also pump themselves dry sooner while the patient sit on their expensive reserves.
  - newyankee 7y ago
    Hopefully in 5 years EVs will become the insurance against OPEC and the BP forecasts of yesteryears will never materialize
  - coliveira 7y ago
    There is no benefit when prices crash and the US has to bail out these companies. It would be much smarter to reduce dependence on oil with investments in clean energy, instead of making the economy dependent on that same polluting industry.
neonate 7y ago
https://archive.md/tfWyx https://archive.md/tfWyx
deleted 7y ago
[deleted]
Robotbeat 7y ago
What we should be doing is any time OPEC does this kind of price war, we expand the Strategic Petroleum Reserve. "Keep it in the ground" while also building an increasingly secure rainy day energy stockpile.
- perl4ever 7y ago
  It appears that purchasing oil right now for the SPR was portrayed as a "bailout for big oil" so it was left out of the recent legislation.
  - jjeaff 7y ago
    The defense department has plenty of money. Maybe they should reallocate some of that budget to purchasing oil for storage. Having plenty of oil is definitely part of national defense.
    - perl4ever 7y ago
      In fairness, now that I check Wikipedia, it appears that the SPR is 80% full, and furthermore the average price paid was about $28/barrel. Right now WTI is $25ish and Brent is almost $28, so adding more to it probably isn't particularly vital at this moment, either in terms of increasing energy independence or in taking advantage of cheap prices.
- woeirua 7y ago
  To be blunt, the SPR is superfluous now. It made sense when we were largely dependent on imported oil as we would have a buffer during a supply disruption. Now that the US is producing so much oil, and seemingly has almost unlimited amounts sitting in shale plays across the country, the SPR is much less useful.

88 points by Reedx 7y ago

Let the peak oil hysteria from the 80s and 90s be a reminder to everyone here how fallible common beliefs are among the population.

eloff 7y ago
Peak oil theory is sound economics. We now have sufficient proven and suspected reserves that we expect that demand will tail off before supply does, so we expect that we won't have a supply crunch. But it could have possibly gone that way if the Earth had fewer extractable reserves or if humans had been less innovative in finding new methods of extraction. It really just comes down to whether demand or supply tails off first.
- jessaustin 7y ago
  Okay, well it would still be nice if we could tell ahead of time which pronouncements of "sound economics" are valid and which are total bunk. Even at the time that Peakists and oil investors (were these really different groups?) were most noisome, lots of more sober people could see the bunk.
  - eloff 7y ago
    It's basic supply and demand, which is microencomics, formally known as the non-bunk part of economics. Macroeconomics is where the bunk lives, so it's quite easy to tell - only slightly joking. I don't think anyone on either side really knew with oil how things would go. Hindsight is 20-20, and one of the two camps was going to win with 100% certainty. It's not fully decided yet mind you, peak oil could still happen if people keep increasing demand for it instead of weaning away from fossil fuels. But I don't think that scenario is likely at all.
    - jessaustin 7y ago
      I don't recall any of the original Peakist manifestos including your very reasonable caveats about hindsight and uncertainty? Really though, this is why I sort of stopped worrying about peak oil about a day after I was first exposed to the idea. It was a very absolutist disastrous sea-change phase-transition sort of scenario, and those are relatively rare in real life. (Well, at some level they are very common: everyone is conceived at some time and dies at another. These details disappear in aggregate.) It's much more common for equilibria that have been stable over decades to continue that stability, even if at slightly different locations. Lots of things are more expensive in our modern times than they used to be; somehow society has survived.
    - woodandsteel 7y ago
      It became a moot argument due to the rise of renewable energy and concern about global climate change. I really doubt that is going to change for many decades.
- Majromax 7y ago
  > we expect that demand will tail off before supply does While I agree with your "sound economics" conclusion, I think that tapering demand was not part of the "peak oil" modeling. The underlying assumptions involve no particular shift to the oil demand curve, whereas with improvements to other energy technologies (renewable energy, but also natural gas) we find that oil demanded per unit output at a fixed oil price appears to decrease with time. (The covid-related demand shock is of course not helping to bolster this curve.)
- credit_guy 7y ago
  > Peak oil theory is sound economics. Why is oil special? Why not peak iron, aluminum, concrete, NaCl, or any or the myriad other things we consume? All of them are in finite quantities, not only oil. Earth has a finite mass after all.
  - jessaustin 7y ago
    Haha, ISTR something on HN within the last year about "peak sand"[0]. All physical substances are vulnerable to this silliness: we're nowhere near "peak peak". [0] https://news.ycombinator.com/item?id=20363875 https://news.ycombinator.com/item?id=20363875
  - thechao 7y ago
    Iron, aluminum, and salt are extremely common and very much renewable. Concrete is looking like it might be sand limited, and of limited renewability; there's already concern over our long-term ability to make concrete. Oil, on the other hand, we literally burn & convert into C02, and other fun stuff. Once we use it, it's pretty much gone.
    - throwaway373438 7y ago
      > Once we use it, it's pretty much gone. Oil is as renewable as any other renewable resource. It's made from plants. We're only at risk of running out of cheap crude mined from the earth with a positive net energy return at a low price. We aren't ever at risk of not being able to have oil. It's an open question whether our access to cheap fossil fuel will outlast our demand for it.
      - deleted 7y ago
        [deleted]
      - BoiledCabbage 7y ago
        > We're only at risk of running out of cheap crude mined from the earth with a positive net energy return at a low price. We aren't ever at risk of not being able to have oil. A: Our business is running out of money we can no longer get any loans at any interest rate. B: False. You're not running out of money or access to loans. You can still get loans as long as you're willing to put down more collateral in cash upfront than the amount you're borrowing. I think see why you used a throwaway for this insight.
- codingslave 7y ago
  No. There is enough oil on the planet for another 500 years. There is no shortage.
  - woodandsteel 7y ago
    >There is enough oil on the planet for another 500 years Math please? And remember when people talk about peak oil, they mean oil that is cheap enough to be of economic use.
polotics 7y ago
This statement of yours shows a deep misunderstanding of the relationship between price and availability as it pertains to oil: less availability only implies higher price in a very local way and for very short time spans. Oil is too vital to the global economy, it's not competing against any other energy source at its scale and mode of usage, and it's availability conditions enough of all economic activity, that availability conditions affordability for all economic actors. There is therefore no correlation between availability (production volumes) and prices for oil.

jonfw 7y ago

Article is stuck behind paywall for me

jfk13 7y ago
So if you want to read it, perhaps it's time to consider paying? (Alternatively, private browsing mode might work.)
- Bud 7y ago
  More to the point, it's better to post links that are viewable by the full audience, where possible.
- randallsquared 7y ago
  Paying providers directly either means micropayments or committing to reading enough of that specific news source to get a non-micropayment-sized amount of value from it. No one has really cracked micropayments in a way that has caught on, yet, and the model of depending on a single source for a majority of news has gone the way of print newspapers. Bloomberg, NYT, WashPo, the Economist, and other such places need to figure out how to provide value commensurate with the money they charge, or else figure out how to exist in a world where one of "their" readers still visits dozens or hundreds of other such outlets a month. > Try 3 months for -$105- $6. Cancel anytime. The 105 is just a joke, and even $2 a month is very high, considering there'd be similar payments to 20+ other such outlets.
  - jonfw 7y ago
    exactly. The subscription model only makes sense for loyal readers- which I am not.
- toss1 7y ago
  I'd actually be happy to pay substantially for a sufficiently broad spectrum of news from multiple providers However, $100-$500 to each one that I want to read >5 articles per month is not sustainable. We need one of two models: Pay maybe $0.20/article, refundable if I don't finish, don't like it (obviously limiting the number of Refund hits/month to prevent abuse) Pay once for a selection of feeds, say $100/quarter, and pick your favorite 5 out of 50, get unlimited reads from that batch and 10/month from the rest. I'd happily sign up for either, but no one publication provides sufficient breadth to support at the demanded price level.

vkou 7y ago

Tar sands oil is now trading at $6.6/barrel. This is going to be a disaster for the Canadian petro-provinces. While much of this price collapse has been driven by OPEC, the COVID-depressed gasoline demand is here to stay for at least a few months.

eloff 7y ago
Alberta was already in bad shape before this, with huge sections of Calgary downtown empty, 20% unemployment in rural areas. Now add an oil price collapse and coronavirus shutdown of large parts of the service sector. Very hard times for Alberta ahead. In the oil bust in the first half of the 1980's people would sell their homes for a dollar just to get away from the mortgage because it was completely underwater. I fear we may see those days again in Calgary. I was born there during those days, which I don't remember, but I do recall the stories people told of it while I was growing up.
- vkou 7y ago
  With the economics of the tar sands, the entire province has been doing the equivalent of margin trading, to make ends meet, for the past two decades. Tiny swings in price either bring a moderate windfall, or utter ruin. It's not a great way to run your economy.
  - dsfyu404ed 7y ago
    >the entire province has been doing the equivalent of margin trading, to make ends meet, for the past two decades. Tiny swings in price either bring a big windfall, or utter ruin. >It's not a great way to run your economy. Sure, but what other way do they have to run their economy? Without monumental government effort to keep prices stable grain (and grain derived products) isn't much better.
    - vkou 7y ago
      Alberta used to be a cattle province[1][2], before the petro-firms trampled all over farmer rights, and imported a million people to work the tar sands/support the people who worked the tar sands. Just because you've destroyed the ring, you can't really go back to the Shire, but Alberta's choices in the 21st century are either a return to agriculture, and mass emigration, or a transition to exporting professional services. [1] Ironically, while the price of oil plummets, the spot price for beef is up 20% since the start of this crisis... Although, the price of beef futures is dropping a bit. [2] Edit: I'm aware that agriculture employs a small number of people (1.5-2% of the population, but so does oil extraction - only 0.3% of the population directly works in the tar sands - everyone else supports them.) Like any other industry, it has a large supporting industry of suppliers, truckers, etc. It's not nearly as lucrative as oil, but it's a living.

nogabebop23 7y ago

Just to put this in perspective, we're talking about one bid for basically land-locked asphalt in a period of essentially zero demand. I don't know what the size/liquidity of the trading market is, but I'd suspect very small. The market price is currently around $2. This is not oil for energy; reading too much into this is like seeing the price for firewood skyrocket and expecting people to freeze to death this winter.

phaemon 7y ago
People freeze to death every winter because they can't afford fuel. I have no idea what your analogy is supposed to mean.
- valuearb 7y ago
  Where?
  - fyfy18 7y ago
    In the UK around 3,000 people die per year because they can't afford fuel costs. https://www.independent.co.uk/news/business/news/cold-weather-uk-winter-deaths-europe-polar-vortex-a8224276.html https://www.independent.co.uk/news/business/news/cold-weathe...
    - valuearb 7y ago
      How? The cost to heat a home is a tiny fraction of the cost of owning a home.
      - mirimir 7y ago
        A couple decades ago, we owned an 18th century house in the northeastern US, with some 19th century additions. The mortgage and taxes totaled ~$2.5K per month, and oil heating cost peaked at $500 per month in the winter. It had an historic designation, and insulating it properly would have been impossibly expensive.

twomoretime 7y ago

It's funny that we're technically cheering on a cartel (OPEC) to artificially raise prices for a commodity that the world depends on. Ok maybe not so funny, but it's a conversation worth having, isn't it? Doesn't it imply something severe about free market innefficiencies?

elgenie 7y ago
On of the classic ways that oligopoly and monopoly power can be abused is by engaging in temporary price wars to drive any smaller competitors so that prices can later be jacked up and monopoly profits reeled in. That's what's happening here.
- Robotbeat 7y ago
  If we ignore the regressive effects of (eventual) high energy prices (which are significant! a LOT of people are helped by low gas prices. Popular protest understandably occur when governments eliminate deep fuel subsidies)... ...then the long-term monopoly rents being much higher in terms of total revenue is actually good for the environment and maybe good for humanity in absence of something more rational like a carbon tax. It can act like a Carbon Tax, but with the revenue going to Saudi Arabia or Russia (etc). In other words, non-ideal... But does maybe help electric cars in the very long-term (ignoring the near-term damage to existing electric car makers, and assuming we wouldn't be instituting a carbon tax anyway). Much better would be a local carbon tax with revenues redistributed to counteract any regressive impact while also funding transition to alternatives.
- twomoretime 7y ago
  Oh no, I don't think so in this case. Putin and SA are the primary belligerents, in which case they may have other geopolitical motivations for playing this game.

jonfw 7y ago

What's the volume being traded at that price? I'll bid -$10 to buy your house, doesn't mean that's what your house is worth.

frandroid 7y ago
You might want to avoid paying hefty municipal taxes or another impending viability, at which point paying less than taxes might sound like a cheaper alternative to get rid of the house. Same with these oil producers. There might be too much crude sitting on trucks going to an already-full storage facility, and they need to clear space in order to empty trucks, even if production upstream has already shut down.
ddebernardy 7y ago
If someone accepts your -$10 bid the house will totally be worth that by definition. Remember the $1 houses from Detroit a decade ago. They weren't even worth $1 due to the tax liability that came with them, and they didn't sell for that reason.
- jjeaff 7y ago
  My grandfather bought a $1,000 house years ago, not in the Detroit area, but a similarly blighted area. Immediately after purchasing it, the city started fining and hounding him to get it cleaned up and up to code. He went in to court at one point and asked the judge why he was getting all these notices when it was already the nicest house on the block. The judge's answer was something to the effect of "oh, well they can't afford to fix it up."
- valuearb 7y ago
  Price is not equal to value. Occasionally prices get silly for irrational reasons.
- jonfw 7y ago
  Exactly- did anybody accept the negative bid? The article only mentions the bid itself, which makes me think not.

coliveira 7y ago

The US has an oil industry that is completely unreasonable. The whole idea of US oil production is that the price needs to be high enough to support the costs of shale extraction. But their own existence forces the prices down by oversupply. It is an economic time bomb.

mschuster91 7y ago
The existence of the US oil industry is not unreasonable. The US needs their own oil supply for military security - without domestic production the US would be subject to Russian and OPEC extortion (which the Russians and OPEC are pointing out at the moment).
deleted 7y ago
[deleted]
dragontamer 7y ago
Its insurance against OPEC raising prices. Without the shale oil industry, OPEC will just raise prices. With the shale oil industry, OPEC lowers prices to try to wring them out of business. Gotta think big picture and geo-political issues. In isolation, its a negative (especially with such low prices right now). But in the great scheme of oil-independence from OPEC / other oil producing companies, there's a benefit.
- kevin_thibedeau 7y ago
  OPEC countries also pump themselves dry sooner while the patient sit on their expensive reserves.
- newyankee 7y ago
  Hopefully in 5 years EVs will become the insurance against OPEC and the BP forecasts of yesteryears will never materialize
- coliveira 7y ago
  There is no benefit when prices crash and the US has to bail out these companies. It would be much smarter to reduce dependence on oil with investments in clean energy, instead of making the economy dependent on that same polluting industry.

neonate 7y ago

https://archive.md/tfWyx https://archive.md/tfWyx

deleted 7y ago

[deleted]

Robotbeat 7y ago

What we should be doing is any time OPEC does this kind of price war, we expand the Strategic Petroleum Reserve. "Keep it in the ground" while also building an increasingly secure rainy day energy stockpile.

perl4ever 7y ago
It appears that purchasing oil right now for the SPR was portrayed as a "bailout for big oil" so it was left out of the recent legislation.
- jjeaff 7y ago
  The defense department has plenty of money. Maybe they should reallocate some of that budget to purchasing oil for storage. Having plenty of oil is definitely part of national defense.
  - perl4ever 7y ago
    In fairness, now that I check Wikipedia, it appears that the SPR is 80% full, and furthermore the average price paid was about $28/barrel. Right now WTI is $25ish and Brent is almost $28, so adding more to it probably isn't particularly vital at this moment, either in terms of increasing energy independence or in taking advantage of cheap prices.
woeirua 7y ago
To be blunt, the SPR is superfluous now. It made sense when we were largely dependent on imported oil as we would have a buffer during a supply disruption. Now that the US is producing so much oil, and seemingly has almost unlimited amounts sitting in shale plays across the country, the SPR is much less useful.