Speaker 1: It's Wednesday, April. I'm oscar A Mirrors from the Daily
Speaker 1: Dive podcast in Los Angeles, and this is your daily
Speaker 1: coronavirus update. For the first time ever in trading, US
Speaker 1: oil prices dipped into negative territory on Monday. Companies had
Speaker 1: to pay to get rid of the oversupply of oil.
Speaker 1: But this doesn't mean that you'll get paid to take
Speaker 1: gasoline off someone's hands. Well, we might see modest savings
Speaker 1: in the next few days and weeks. The big question
Speaker 1: remains what to do with all that extra oil. Amy Harder,
Speaker 1: energy reporter at Axios, joins us for more. Thanks for
Speaker 1: joining us, Amy, thank you for having me. I wanted
Speaker 1: to talk about oil prices, concerning what's going on with
Speaker 1: all of the coronavirus and all the social distancing economies
Speaker 1: on lockdown. For the first time ever in trading, US
Speaker 1: oil prices went into negative territory on Monday. The oil
Speaker 1: markets have been upended. People are pointing to some deep
Speaker 1: financial jeopardy if this keeps going. Amy, tell us what's
Speaker 1: going on with this. This is really an unprecedented time
Speaker 1: for all of us, of course, but especially the oil industry,
Speaker 1: because if you think about it, the solution to solving
Speaker 1: the virus is to get us to stop moving around,
Speaker 1: and yet the whole purpose of oil is to move
Speaker 1: us around. And so what happened with these prices going
Speaker 1: negative on Monday, and we expect to see it in
Speaker 1: the coming weeks continuing, is that there's too much supply
Speaker 1: of oil and not enough demand. So literally, companies are
Speaker 1: having to pay people to take their oil, and it's
Speaker 1: really unprecedented, and we don't really know where the bottom
Speaker 1: is yet. Now. I wanted to focus on that for
Speaker 1: a moment because people here that that companies are having
Speaker 1: to pay others to get rid of their oil, and
Speaker 1: right away people think, oh, man, well, gas prices are
Speaker 1: gonna drop tremendously. Are they going to pay us to
Speaker 1: take away the gas. It's not really the way it works,
Speaker 1: but we could see some gas prices easing, but maybe
Speaker 1: not for a couple of weeks. That was one of
Speaker 1: the first stories that I written about negative prices, because
Speaker 1: obviously the oil industry and people who work in that
Speaker 1: sector are very concerned about the negative prices. But for
Speaker 1: most people, what we care about is gasoline prices, and frankly,
Speaker 1: lower the better. But I quickly confirmed with experts that
Speaker 1: even though yes, prices have gone negative in the global
Speaker 1: oil market, no, we will never get paid to fill
Speaker 1: up our gas tank. And that's for a lot of reasons,
Speaker 1: but one main one is that there's a lot of
Speaker 1: other costs that go into a cost of gasoline that
Speaker 1: will offset the negative cost. Global oil prices make up
Speaker 1: a little bit more than fifty of a gallon of gasoline,
Speaker 1: but then there's a refinement costs for transportation, and then
Speaker 1: finally state taxes. But that said, states across the country
Speaker 1: are still seeing prices at the gas tank plummet. Some
Speaker 1: are seeing I think Wisconsin and Kentucky O two examples
Speaker 1: where drivers, a few of those on the road anyway,
Speaker 1: are seeing prices below a dollar. Wow, that's amazing. I
Speaker 1: live in California, so I don't think we'll ever receive
Speaker 1: those prices again. But still things have gone a little
Speaker 1: bit better. The immediate effect of these negative territory prices,
Speaker 1: you might be able to see something in a few
Speaker 1: days or so, but really not much to look forward
Speaker 1: to there. The other thing we're seeing, too, is kind
Speaker 1: of this ebb and flow of these gas prices. As
Speaker 1: soon as we get out of this, we could be
Speaker 1: in for some very high oil prices. That's typically how
Speaker 1: these cycles work. I mean, the oil industry is no
Speaker 1: stranger to booms and bus so the industry has been
Speaker 1: in a relative boom over the last year. The United
Speaker 1: States is now the biggest producer of oil and natural gas,
Speaker 1: and so they've been booming for a while and now
Speaker 1: they're busting and this is a record bust. So at
Speaker 1: least the way typical economics work is that we are
Speaker 1: going to be seeing extremely higher prices, and not next month,
Speaker 1: not even this summer. The summer will see lower gasoline prices.
Speaker 1: Still hopefully we're able to be driving around, but this
Speaker 1: price spike could come and then in the middle of
Speaker 1: this a decade and so when hopefully the global economy
Speaker 1: is doing well, we'll see higher prices and we can
Speaker 1: thank the pandemic for that. Let's talk a little bit
Speaker 1: more about what's going on right now. So my understanding
Speaker 1: is that these prices have gone so low because for
Speaker 1: the most part, people that have bought all of their
Speaker 1: oil for the month of May. Because we're always trying
Speaker 1: to project there's always a future thing happening here, most
Speaker 1: people have already bought all the oil they're buying for
Speaker 1: the month of May, so that's why it's so low.
Speaker 1: So we're looking ahead to the following month to see
Speaker 1: where prices are going to be at then. So if
Speaker 1: you want to get technical about it, that's what technically
Speaker 1: drove prices into the negative territory yesterday on Monday, it
Speaker 1: was really the end of a trading window for the
Speaker 1: month of May. I liken it to sort of the
Speaker 1: game of musical chairs, and the music stopped and some
Speaker 1: of the oil barrels can't have a place to sit down,
Speaker 1: and that's what prompted the prices to go negative. We're
Speaker 1: into a new month though, and the music is back up.
Speaker 1: The prices are still really low, so as the month
Speaker 1: wears on, you can anticipate that will go into negative
Speaker 1: territory again. I should emphasize that we're talking about US
Speaker 1: based futures or futures contracts, so w t I VERSUS
Speaker 1: branch which is based in Europe. And what do we
Speaker 1: do with all of this extra oil that we have
Speaker 1: right now? I know the Trump administration said they want
Speaker 1: to add about seventy five million barrels to the nation's reserves,
Speaker 1: but beyond that, what do we do with this extra
Speaker 1: supply that we have. I mean, that is the million
Speaker 1: dollar question. There's just no place to put it. There's
Speaker 1: been dozens and dozens of ships added to the seas
Speaker 1: full of oil just sitting out there in the ocean.
Speaker 1: You know, it's a little ironic that this is happening.
Speaker 1: Yesterday was the ten year anniversary of the BP oil spill,
Speaker 1: so it's a little ironic there that oil is on
Speaker 1: the water in another way, not even on my radar.
Speaker 1: And I remember all the coverage of that. I mean
Speaker 1: it was just huge, how much we're losing at that point,
Speaker 1: right So this is a very different way, and at
Speaker 1: least an environmentally better way to have oil on the water.
Speaker 1: But you know, this is a good question. And Trump
Speaker 1: has said, oh, we have a lot of places to
Speaker 1: put the oil, but you know, we really don't. And
Speaker 1: I think that's one of the biggest questions that this
Speaker 1: administration is really grappling with right now. I mean, just
Speaker 1: the numbers are staggering. So yeah, maybe another seventy five
Speaker 1: million barrels into the nation's strategic reserves, but you know
Speaker 1: the world usually consumes about a hundred million barrels a day,
Speaker 1: and right now oil is off at least twenty million
Speaker 1: barrels a day. So that's twenty million barrels a day
Speaker 1: of excess oil that has nowhere to go. And that's
Speaker 1: a day. So I mean, the numbers are just staggering,
Speaker 1: and so it's just you know, a recent column of
Speaker 1: mine said, the world is locked down and drowning an oil.
Speaker 1: There's no place to put it. So ultimately the end
Speaker 1: effect will be companies will just have to stop drilling.
Speaker 1: And beyond that, will we see any bailouts or any
Speaker 1: type of financial help coming to the oil industry. I
Speaker 1: know there's just been kind of rumblings of conversation so
Speaker 1: far about that from the administration and so forth, But
Speaker 1: is that also something we might see on the horizon.
Speaker 1: I certainly think the more dire the situation gets, the
Speaker 1: lower the prices go, the more likely something will come
Speaker 1: out of Washington on this. President Trump tweeted about that
Speaker 1: today on Tuesday, saying that he's directing the Energy Department
Speaker 1: and the Treasury Department to come up with a plan
Speaker 1: to help the industry. I think Congress, with the House
Speaker 1: controlled by Democrats, the only way Democrats will take what
Speaker 1: they'll call a bailout for the oil industry, is it
Speaker 1: if they get something for renewable energy companies for example,
Speaker 1: So I anticipate some sort of pairing of an oil
Speaker 1: support package along with support for the renewable energy industry, which,
Speaker 1: by the way, is also struggling, because everybody, all of
Speaker 1: us are struggling, except for maybe Zoom and pizza joints. Well,
Speaker 1: we'll have to definitely monitor and see what happens. Amy Harder,
Speaker 1: Energy reporter at Axios, thank you very much for joining us.
Speaker 1: Thank you for having me on. I'm oscar mirrors and
Speaker 1: this been your daily coronavirus update. Don't forget that. For
Speaker 1: today's big news stories, you can check me out on
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