Oil prices fell to zero today. And kept on going. May WTIC futures traded below $-36 a barrel. No, that’s not a typo. Traders are literally paying to have oil taken off their hands. Here, you can have a barrel of oil and we’ll throw in $36 for your trouble.
The glut of oil has reached the point where there is just not enough storage for it all. It’s expensive for producers to shut down wells and then restart them, so they’ve continued to produce while consumption has collapsed. Buyers are essentially being paid for storage as the cost exceeds the market value of the commodity itself. May futures expire tomorrow, meaning those long the contract would be obliged to take delivery. June futures are under pressure as well, but held above $20 today. This is a first for WTIC, however; it has never before traded below zero.
What next? Negative rent?
Negative rent? What a thought! I’m surprised our social engineers haven’t wholesale co-opted that idea yet. AOC and company could consider it “just deserts” for a financially engineered economy that has turned into a rent seeking ‘rentier’ society. It may be unconsciously in play even as we speak. San Francisco has put a measure on the ballot to charge landlords for leaving commercial storefronts vacant. Rent control in some areas, I believe turned to negative rent, when the rents couldn’t cover the cost of ownership (and profit) so the landlords let the buildings deteriorate, some eventually walking away after the neighborhood and building values declined ………. think Brooklyn or the Bronx? I’ve read rumbings about imposing charges on vacant condominiums in impacted City centers such as London, Vancouver, Seattle, and San Francisco on owners of units that sit vacant. The locals are disgusted at out-of-towners/foreigners that buy the units for speculation or as a place to park money, launder money or hide money. They also resent the opportunistic Air B and B crowd that buy residential units and turn them into commercial units/hotels, simultaneously driving prices up and in their minds, residential quality down.
That will probably happen around the same time you see the Dow Jones Industrial Average quoted at -15,000…