Oil Price Plunges, Vectoring Physical Economic and Financial Crisis
April 28, 2020 (EIRNS)—On April 27, West Texas Intermediate (WTI) crude oil, which is the benchmark price for oil produced and sold in the U.S., fell to $12.78 per barrel. This year, the prices of WTI and Brent crude have fallen 72% and 68%, respectively.
The lack of storage capacity for oil is becoming a real issue. Bjomar Tonhaugen, the head of oil markets at Rystad Energy said, “The market knows that the storage problem remains and we are on a calculated path to reach tank tops in week. Actions are needed now as the problem stopped being theoretical and far away. The storage clock is ticking for producers and we are approaching the final countdown if no further action is taken.”
At Cushing, Oklahoma, where the WTI price of oil derives from, which is the largest non-governmental storage area in the U.S., the storage capacity is about 85 million barrels; as of now, the oil storage tanks are 60 million barrels full. The tanks are filling up at about 5 million barrels per week. That means in five weeks, they will be completely full. There are hundreds of tankers with full loads of oil at sea, as during the 1973-75 crisis.
As with quantities of U.S. food, the oil is going to waste, a prisoner like the health system’s 40-year takedown, of the lack of foresight to prevent the emergence of a virus such as SARS-CoV-2.
If this isn’t solved, up to 1,000 U.S. oil shale and oil-producing firms could go bankrupt. Simultaneously, trillions of dollars of derivatives, pyramided on top of the oil market, would collapse.
