Negative Oil Prices Explained

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Earlier this week we've started seeing articles noting that oil prices have now gone into the negatives (meaning investors are paying to give away their oil).

What is going on here? How does this make sense?

As always with these weird and wonderful things, it's all basic economics. And to properly understand this, we're going to need to look at 3 things: Negative value items, the 2020 oil market, and how oil is actually sold!

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📚 Want to learn more about oil? We recommend reading "Oil 101", by Morgan Downey
👉 https://amzn.to/2XMN59X (as an Amazon Associate, we earn from qualifying purchases)

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#OilMarket #Recession #Economics

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Sources & Citations -

Lee, K., Ni, S., and Ratti, R.A., 1995. Oil shocks and the macroeconomy: the role of price variability. The Energy Journal.

Pirrong, C., 2011. The economics of central clearing: theory and practice.

Guay, W., and Kothari, S.P., 2003. How much do firms hedge with derivatives?. Journal of financial economics

Pirrong, C., 2009. The economics of clearing in derivatives markets: Netting, asymmetric information, and the sharing of default risks through a central counterparty. Asymmetric Information, and the Sharing of Default Risks Through a Central Counterparty

Articles -

- nytimes.com/article/negative-oil-prices-facts-history.html

- forbes.com/sites/sarahhansen/2020/04/21/heres-what-negative-oil-prices-really-mean/#2c19d87a5a85

- barrons.com/articles/negative-oil-prices-from-the-folks-who-brought-you-the-financial-crisis-51587549601

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Видео Negative Oil Prices Explained канала Economics Explained