TUCSON, Ariz - Oil prices are so low producers are willing to pay people to take oil off their hands---that’s been the upside down oil market of the past few days.
But that’s not automatically good news for consumers or the economy.
Gas prices are already as low as about a dollar-sixty but that’s probably more a hold over from the price war between the Russians and the Saudis. What’s driving prices now is the fact the COVID lockdown has cut driving so much refineries are making less gas , and oil producers are running out of places to store what they’ve pumped.
You have to go back 17 years to find the last time gas prices were in the dollar-sixty, dollar seventy five range. That’s according to Federal Government records ---and before you correct for inflation.
But back then we didn’t have a large share of the population staying home instead of driving around burning gas.
Companies that committed to buy future oil production are so worried they’ll have no place to put it, in some cases they’ve been willing to pay to get rid of the oil and avoid the storage challenge.
But before you decide it’s party time at the pump, consider where oil fits into the larger economy.
University of Arizona economist George Hammond says because Arizona has no real oil industry to be dragged down by low prices, for the short term we can enjoy great gas deals but for the long term the country can’t afford oil prices so low they kill off a share of an industry we’ll need to rebuild the economy.
“The collapse in oil prices will hurt oil production in the US and that's a much bigger share of the US economy than it was 30 or 40 years ago. So, there is some some danger here, particularly from the you know the the artificial decline in oil prices that was driven by the increase in production from OPEC.”
Again, most of the numbers we’ve seen so far reflect the OPEC price war, Now the influence of reduced driving from COVID is piling on top.
Oil industry analysts say it’s hard for producers to simply stop pumping. That could damage the oil wells and leave oil stuck in the ground just when we need it to help drive the economy.