The Great Oil Crash and Petrol prices.

The Chinese have a curse that goes something like “May you live in interesting times” and we the masses of the 21st century really are living in the most interesting of times.

The world is going topsy-turvy because of the recent pandemic which has led to crude oil hitting the lowest price levels of all time.

Because of the worldwide lockdown, the demand for oil has hit rock bottom and for the first time ever oil prices have gone below zero and turned negative.

Oil prices turning negative means that the sellers were paying buyers to take the commodity off their hands over the fear that the storage capacity would run out in May.

Oil firms have resorted to renting tankers to store the surplus supply of oil which has led the oil prices of the United states below zero.

Storage issue

This is an unprecedented demand drop. Nobody in their lifetime has seen anything like this- Peter McNally of the third bridge group.

The demand for crude products like petrol and jet fuel has hit a wall because of the Pandemic which has left the storage hubs close to the brim.

Storage at the United States Oil hub Cushing has grown to more than 15 million barrels in the past month and is expected to be at capacity for the first time in history.

Oil demand has gone virtually almost non-existent, which has left the sellers with barrels of oil and nowhere to store.

Will petrol prices go down?

The oil futures price crashed Monday by 306% on the NYMEX - the New York Mercantile Exchange - a market where commodities such as crude oil, coal, and electricity are traded.

A barrel of oil is still priced in the positive territory it’s the future of oil that has dropped drastically because of the supply and demand situation. 

The barrels are sitting ducks in the storage hub with nowhere to go. But does that mean a drop in petrol prices as well?

Experts are predicting a further drop in petrol prices to be unlikely. OPEC nations recently agreed to slash oil production by 10% to keep in line with the lack of demand because of the Coronavirus Pandemic.

The OPEC decision and petrol prices already being quite low at the time. CommSec is reporting Brisbane's fuel price is at a 15-year low, and the national average is at a four year low of 107.2 cents per liter (CPL) as of last week.

"Wholesale gasoline futures and oil futures are definitely linked, but they don't necessarily reflect each other on any given day," said Jeff Lenard, spokesman for the National Association of Convenience Stores.

Crude oil is not the best predictor of the retail gasoline price. Instead, wholesale gasoline prices which determine what gas stations will pay for the gasoline.

The U.S energy Administration estimated that in 2019 when the full-year average was at $2.60 a gallon. The average transportation and marketing cost was about 39 cents per gallon. The refining costs and profit added another 34 cents on average.

With the volume of gasoline pumped falling by half or more many gas station owners are jacking the profit margins to make up for the drop in demand.

And there are gas taxes as well. So if even you could have bought a barrel of crude oil for nothing on 

Monday 20-04-2020, a gallon of gas for your car will still cost you something. 

According to the recent circumstances the average pump prices are higher because the retailers say they have to make up for the lower volumes of fuel they are selling.

Coronavirus is rewriting the rules of the global economy in front of our very eyes," said Adam Vettese, analyst at Toro.

When the Pandemic is over and the world emerges with a new global order or an economy system question will be raised about the fairness of the pump prices during the great oil crash of 2020.