For the first time in United States history, oil futures have fallen to below $0 per barrel. The Coronavirus pandemic is likely to blame for this extreme collapse. To prove the extent of the collapse, the benchmark of crude oil, West Texas Intermediate (WTI), was priced at $53.86 two months ago on February 20. Today, the price is at negative $37.59. This means that buyers can purchase oil on credit and actually be compensated for holding or storing it.
Hypothetically, this would mean the end of oil production and the collapse of oil as we know it, but this is not the case. There is indeed a cost associated with closing a well. Additionally, there are fees that buyers must pay in order to legally store the oil in which they purchase, meaning that producers avoid paying these fees if they are able to get rid of the excess oil.
While Americans aren’t going to begin to be paid to pump their own gas, they are indeed obtaining gas at dramatically reduced prices. Drivers in at least 13 states across the nation have seen gas prices stumble to below $1 per gallon. According to statistics provided by AAA, the average price of gas nationwide is over $1 less than what it was last year.
Gas prices are certainly not going to remain this low forever, so all buyers should take full advantage of these prices while they can.