Oil Crumbles: No One Knows What it Means

April 15, 2020


I keep hearing these January and February quotes from CNBC financial analyst Jim Cramer in my head as I watch it all happen:

“I’m done with fossil fuels … They’re just done …”

“My job is to help you try to make money. And the honest truth is I don’t think I can help you make money in the oil and gas stocks anymore.”

I’m sure the investors who followed Cramer’s advice back then are glad they did now.

Cramer, of course, expected oil’s downfall would come at a much slower pace. He also thought it’d be because investors would increasingly reject fossil fuel companies because of their role in driving catastrophic climate change. 

I don’t think anyone expected it to happen like this. 

Because of coronavirus, “The global oil industry is experiencing a shock like no other in its history,” International Energy Agency executive director Fatih Birol told the Wall Street Journal on Tuesday. People aren’t going anywhere, or doing anything—so there isn’t a huge demand for oil. Prices are therefore dropping to historically low levels. Twenty dollars a barrels! Look at these charts from the Wall Street Journal and Business Insider. Look at them!

No one knows when life will go back to normal again—if it ever does (yikes). So the oil industry has no idea when demand will go back to normal again. That’s why over the weekend, oil-producing nations led by the U.S., Russia, and Saudi Arabia agreed to a historic 10 percent cut in oil production, to hopefully have demand meet supply again, and raise oil prices enough where oil companies can make money.

This all obviously has implications for climate change. Do I know how significant they’ll be? Do I know what this drop in price, demand, and production will mean in the long-term for the oil industry or for the climate crisis? That’s a hard nope, and a hard nope—but I’ll at least attempt to answer those questions in tomorrow’s newsletter. I’ve already put out a few feelers, but if you know of any experts who could speak to these questions, shoot me an email. I’m at emily@heated.world.

For now, I’m just going to list a few things that cost more than a barrel of oil right now.

4 Responses to “Oil Crumbles: No One Knows What it Means”

  1. Brent Jensen-Schmidt Says:

    Good isn’t it!

  2. doldrom Says:

    Don’t expect this trend to go smoothly. Lack of investment will eventually drive shortages and price spikes; expect careening prices and demand/economy to respond.

    As for low prices, because it costs a lot of money to shut in wells, and storage is scarcer all the time, the price of oil will go negative in certain locales.

  3. ecoquant Says:

    I wonder when gasoline stations will start closing. The margin drops when gasoline is cheaper, and if people are not traveling, no one is buying donuts or popcorn from the stations either.

  4. […] feel-good story in a nervous time, regarding the cost of oil, and in the “we’ll be needing a lot more body bags” […]

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