How can the price of oil be less than zero? Do that mean gas stations will pay us to fill up?

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  • Anonymous
    9 months ago
    Favourite answer

    It is NOT less than zero.  It just means the price is less than the production cost, that is oil companies are selling oil at a loss.

  • 9 months ago

    No, it means the load of crude will be held in storage and sold for refining when the price goes up. People always invest in oil futures that way.

  • Anonymous
    9 months ago

    I'm guessing you haven't been driving long. If you had you'd know that when the price of oil goes up, fuel at gas stations goes up a nanosecond later, but when the price of oil goes down it takes weeks for the price to come down on the forecourts. 

    You're also forgetting that a huge part of the price the motorist pays is tax. The government still wants its tax.

  • Mmm J
    Lv 7
    9 months ago

    The price of oil is not "less than zero", globally. Demand has been cut due to work from home and many other "social distancing" initiatives continue/expand.

    And you are talking about two different things. Raw, unprocessed oil and gasoline that's been processed.

    First:

    I found https://apnews.com/ce1c170194fe7803c498a72389ae5df...

    Note that this is the price of oil in the future May - we are in April - and is abnormal because reserve storage is essentially full and there's nowhere to store pumped oil - in the rest of the world. In the meantime, US pricing is in the $21 range per barrel of oil. After the oil is pumped, it is transported to a refinery and lots of things are made... including gasoline. Then the gasoline (and other things) is transported elsewhere. For gasoline, that is usually a gas station.

    Second:

    In the US, the price of gas at the pump includes the price of the oil... plus the cost of storage, refining the oil into gasoline, transportation of the oil or gasoline, PLUS local, county, state and other taxes which are not a percentage of the per gallon price of oil, but based on the number of gallons pumped.

    Even if the oil companies and the gas station owners and everyone in-between got together and agreed to give gas away, there is no elected government official who would ever give up their tax collection on each gallon of gas, so the pump price will always have a price you pay.

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  • L.N.
    Lv 7
    9 months ago

    If it costs more to store it, refine it and transport it than you can sell it for, the price is negative. Won't stay there for long though once production is cut.

  • Barry
    Lv 6
    9 months ago

    I'm not sure about your maths, but you sure made me laugh!

  • Anonymous
    9 months ago

    And where on earth did you get the notion that the price of oil was less than zero?

    (In case you missed the implications, that means we do not feel an urge to explain which does not exist)

    That is not the price of crude oil, that is the price of a *specific* load, that is filling containers and that is costing a lot just to keep in storage -- it is like you paying for garbage removal. YOUR price at the pump will never be negative.

    Take this as a discount on crude that was already bought and paid.

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