You’ve probably seen articles being shared all over Facebook about the price of crude oil crashing below zero into negative values. And here you thought the pain of negative numbers in add maths and calculus was something you left behind in high school.
In the words of Johnny Tran from The Fast & The Furious, “Too soon junior.”
Nonetheless, what exactly does the price dipping below zero actually mean? In fact, how is that even possible? Oh wait, does that mean they’ll pay you to take the oil off them? In short, yes but that doesn’t mean the petrol station operator will be paying you to fill up your car’s tank.
The price of crude oil is heavily dependent on storing it and that accounts for part of the barrel pricing. With billions of people under some form of restricted movement or complete lockdowns due to the Covid-19 pandemic, people simply aren’t consuming oil in the way they used to.
Simply put, the negative pricing, which is unprecedented, is a result of oil producers paying oil retailers to take the existing stock of crude in storage of their hands to free up storage for the next load of oil.
Crude oil is traded globally in terms of futures and the world’s storage capacity for it is currently at its limit. Stopping production isn’t as simple as switching off your television and then switching it on again when you feel like it.
Even the move by The Organisation of the Petroleum Exporting Countries (OPEC) that, together with Russia, deciding to cut oil output by 10 per cent saw that becoming the largest reduction of oil output in modern history.
So, in conclusion the price of crude oil nosediving will not translate into oil retailers paying motorists to fill up their tanks but it should see the price of petrol continuing its downward trend for now.
For reference sake, the current price of fuel is as follows:
RON 95 - RM1.25
RON 97 - RM1.55
RON 100 - RM2.06
Euro 2M - RM1.43
Euro 5 - RM1.53