Oil Now Same Price As Pack Of Cigarettes Just Kidding Now It's Trader Joe's Wine JK Now It's Stamp JK Now It's Gum Ball JK Now It's Free

Politics

Yay, oil is FREE! Good job, Mister President! Right?

Yeah, not exactly. Last week Donald Trump intervened in the long running dispute between Russia and OPEC over how much dead dino juice to suck out of the ground and turn into clouds of carbon dioxide. Because he loves the free market, but he loves his pals in the oil industry more. See, Russia and Saudi Arabia have spent the past decade trying, and failing, to drive American oil producers out of business. The plan was to flood the market with cheap oil so that US drillers couldn't make a profit and were forced to shut down. Except it didn't work, and the OPEC nations were bleeding cash themselves. So in 2016 they agreed to cut production, taking oil off the market to prop the price up to a point where they could all eat.

But last month, Putin told Saudi Prince MBS that he wasn't going to play ball any more. If we might quote our own selves for a moment:

So in March, Putin marched into OPEC and shouted, I will no longer allow Mother Russia to be raped by swarthy men in dresses and drunken louts from North Dakota! Russia is turning the taps back on. And MBS was like, Oh, yeah? Well fuck you then, we'll just flood the market with the cheapest oil yet! And Mexico was like, Burn it all down, pendejos! And American oil producers were like, Oh, save us with your big brain and enormous, manly hands, Donald Trump! More or less.

Obviously, OPEC is not our friend, and yet still Trump stepped in to broker a deal with the cartel to cut production by 9.7 million barrels a day starting in May. His goal was to raise the price so American producers don't go broke. But of course Trump is bad at everything, and instead of rising, prices fell 10 percent on the announcement of Trump's amazing negotiation. So Arty McDeals hopped on his Twitterphone to do what he does best — LIE.


Except, LOL, none of that is true. As The Wall Street Journal reported last week, Saudi Arabia wanted to re-label reduced global demand and all those barrels not making it to market in Venezuela and Iran due to sanctions as part of a "production cut" magically adding up to 20 million barrels, but the other OPEC countries wouldn't let them do it.

Here on Planet Earth, billions of people are on some form of lockdown, which means they're not driving, or flying, so the demand for gas has fallen by 27 million barrels a day. Which is more than 9.7 million, so OPEC's cuts would still leave 17 million extra barrels of oil per day coming out of the ground with no one to buy it. See the problem?

And now let's talk about oil futures contracts. WAIT, COME BACK! We promise to make it as brief and painless as possible!

The reason this is all coming to a head today is that tomorrow is the last day to trade in May oil futures. A "futures contract" is just a promise to pay a certain amount for some commodity at a future date. It's like "I Will Gladly Pay You Tuesday For a Hamburger Today," but instead of hamburgers, it's oil that has to be paid for and picked up next month in Cushing, Oklahoma. And instead of "pay" it's more like "take that shit off your hands, but you might have to pay me to hold it for you." Well, it is now, anyway.

Because literally no one thinks there's going to be demand for oil in May. Donald Trump can make fart noises every afternoon about the economy roaring back to life next month, but the people with skin in the game are betting against it. Which is why oil hit ZERO DOLLARS PER BARREL today.

Image via MacroTrends.net

In fact, it hit NEGATIVE $37.63 a barrel today. They will pay you to take that oil off their hands next month.

June looks a little bit better, since economists anticipate some easing of coronavirus restrictions on movement. But June futures are only trading at around $24 per barrel, which is more than negative $37, but still below a price that allows producers to make a profit.

So Larry Kudlow and Steven Mnuchin can arglebargle about the economy going off like a rocket in the third quarter, but the oil futures people aren't betting on it.

Image via Wall Street Journal

Note that the market is betting that oil will have rebounded a bit in November, but even if they're right, that's the same price it was before Donald Trump worked his, umm, magic with OPEC.

Which is why oil traders are now paying $100,000 a day to park their shit on tankers for six months, up from $29,000 a year ago, according to The Wall Street Journal. Because there is so much of the stuff sitting around that they literally have no place on dry land to put it while they wait for consumers to start buying it again. And they are really, really hoping that you will pay them some Tuesday in November for today's dead dinosaur hamburger today. Well, more or less.

TL, DR? Oil producers spent decades pumping more oil than the world markets could possibly absorb, and now that demand has collapsed as we all shelter in place, they're paying people to haul it away or store it in hopes that it will get better in the fall. And Donald Trump, as always, has made a bad situation much, much worse.

Now what? It's your OPEN THREAD!

[WSJ / BBC]

Follow Liz Dye on Twitter RIGHT HERE!

Please click here to support your Wonkette. And if you're ordering your quarantine goods on Amazon, this is the link to do it.

How often would you like to donate?

Select an amount (USD)

Liz Dye

Liz Dye lives in Baltimore with her wonderful husband and a houseful of teenagers. When she isn't being mad about a thing on the internet, she's hiding in plain sight in the carpool line. She's the one wearing yoga pants glaring at her phone.

Donate

How often would you like to donate?

Select an amount (USD)

Newsletter

©2018 by Commie Girl Industries, Inc