Gas prices at a Sunoco station in Hanover, Mass. earlier this month. Photo: David L. Ryan/The Boston Globe via Getty Images
In an unprecedented move, U.S. oil prices went negative Monday — meaning, companies paid to sell their oil — but don’t expect to get paid to fill up your tank at the gas station.
How it works: Several other layers of costs, including refinement, transportation and various state taxes suggest negative gasoline prices are extremely unlikely, per Patrick De Haan, head of petroleum analysis at GasBuddy.
The big picture: The coronavirus-fueled lockdowns around the world are choking off oil demand, throwing the oil industry — which was already oversupplied before the pandemic — into historic chaos.
- An equally historic production cut of the world’s biggest producers likely delayed the drop in oil prices we’re seeing today — and made it a tiny bit less worse.
- Prices are likely to keep dropping, or at the very least remain very low, for at least the next few weeks given there is simply not enough places to store all of the extra oil sloshing around the world as many of us stay at home.
Where it stands: The price of oil makes up more than 50% of the price of a gallon of gasoline, but it takes several days for changes in the global oil market to make it onto gas stations’ billboards.
- The way the global oil market works and prices oil into the future, this foray into negative territory is very unlikely to have an impact on domestic gas prices, De Haan tells me by email.
- The prices that went negative were WTI — the U.S.-based benchmark. Brent prices, based in Europe, are still hovering around $30 a barrel, a relative high price.
- The national average price for gallon of gasoline stands at $1.80, per AAA, but several states have prices significantly lower, GasBuddy writes.
The intrigue: Don’t rush to your local gas station today, thinking you’ll get a steal. De Haan says a good time to fill up — if you have anywhere to go as we’re all mostly locked down — would be in a couple of weeks.
What we’re watching: Economists generally say that the lower prices are at one point, the higher they will be at some point in the future. So buckle up. In a few years’ time, we may be in for some very high oil prices — and therefore gasoline prices.
Go deeper: Oil prices plunge into negative territory