Oil Storage Wars
N. P. R.. Has Been on a wild ride in the last few months. West Texas crude start off the year costing about sixty dollars a barrel, then corona virus head, and the oil industry got hammered yet people were not driving or flying, and so demand for gas was way down by April. The price of oil had dropped to fifteen dollars a barrel, and then in late April something crazy happened. We begin with an historic collapsed in energy prices, oil falling below zero dollars a barrel for the first time. LA- hit an all-time low on Monday plunged into negative territory. The price settled at get this negative. Thirty seven dollars per barrel negative thirty seven dollars a barrel. It's kind of mind blowing. How can something be worth negative money? Especially something that we use every day that makes our cars and airplanes go. That makes plastic bottles and fleece jackets and air conditioners refrigerators. How could that be worth nothing? The reason was storage. This is indicated from planet money. I'm Cardiff Garcia. And I'm Stacey van man today on the show, the oil storage boom as demand for oil fell demand for oil storage has gone crazy and right now it's having a huge domino effect on the industry. Planet? Money, talk it's economics but relatable. What was it originally planet money to Talk Radio for your is? Short. That's the best one. As Cova nineteen re tactic on the US economy. Nobody wanted to buy oil oil companies had pumped all of this oil out of the ground, and they couldn't sell it. They had all this extra oil on their hands and oil as a hazardous substance. You have to take care of it and store it properly once you've pumped it out of the ground in April nobody could sell oil and everybody needed to store it. David bomb is an oil analyst with Cowan an investment bank. It's not something that you can just keep sitting around like in someone's backyard. Companies, they were looking out and basically saying hey, in the month. I'm not sure that I'm GonNa have placed the put this. And I think there was just a fear that we would run out of storage space. Oil is normally stored in these giant tanks tanks that hold more than half a million barrels of oil each, but all those tanks they started filling up, and so the people who owned the tanks started raising their prices prices to store oil doubled, tripled wind up by six hundred percent in some cases, so for one day of oil storage, instead of paying one hundred fifty thousand dollars a day, which is usually what it costs to store. Oil Oil companies were paying practically a million dollars per tank per day to store. Their oil would be like. If all of a sudden, your Internet, though is like seven hundred dollars a month, and you're like wait like that was just something I thought was gonna stay like seventy dollars a month now seven hundred. At the same time profit through drying up and debt collectors were knocking an oil companies literally could not afford to have oil. They could not afford to store it, but they couldn't sell it either, so they started getting creative. Some companies like has bought enormous oil tankers, and filled them to the brim with oil and push them out to see other companies just went bankrupt. They couldn't their oil and they couldn't. Couldn't afford to store it, but of course this was an opportunity to. If you could store oil, you could make a lot of money and people did start seeing opportunities, people like Sean Lovely President of well-water Solutions Rentals, or headquartered actually of Evansville Wyoming right in the middle of Wyoming. Shawn's company builds big storage tanks for water. You know. Have you seen those above ground swimming pools, just I mean. Take that out and make it two hundred foot, and and then make the sidewalls twelve feet. That's that's what it is. Sean the price of oil storage, going crazy and thought wait. We could start oil in our water tanks, and we can charge a lot for that. Sean realized he could make forty thousand dollars a month storing oil in one of his tanks, and still be really competitive pricewise, so he plays a couple of ads online thought to get a few calls boy, it was it was crazy there at the beginning him Outta, calls and thanks. It was absolutely bonkers just. Just, getting flooded with calls, and we had some people saying. We want one hundred tanks like Dang. All kinds of companies jumped into the oil storage business companies that normally store wine laundry detergent shampoo. They were all jumping into oil storage, and this is how the free market is supposed to work right when there's big demand for something, the price of that thing goes up and when the price gets really high, people get excited and think hey I should get into that business, and so before you know it, the supply increases and eventually there's not a shortage anymore, so the price goes down. Yup Supply and demand economics went one yup, and in fact, oil analyst David Dukla bound thinks that is going to happen here. The oil storage boom, not long for this world. I don't know what kind of jeans you wear, but whatever your jeans company is like making facemasks like they're probably stopping do that now. You know okay, so it like this sort of Jerry rigged. Oil Storage is like the face masks of the oil industry. Yeah! The ones that like a barbecue at your house. No, Hey, you should, you should let people store oil. You know like Oh. Yeah, that's all about that. Divas as soon as the economy gets going again and demand for oil goes up, companies will not want to store their oil. They will want to sell it and make money off of it, so demand for storage will go down, and the price of storage will go down. In fact, we're already seeing that. A cities across the US started to reopen oil prices started rising again and demand for storage started to flag Sean lovelace of well-water. Solutions, he noticed. Where we were getting probably. Three four or five big calls a day. I mean like because I mean. We might get one a week now. so yeah, it's It's died down quite a bit with the oil prices hopping back up and that could continue in a big way. There's even been speculation that oil prices could spike as countries reopen, and the demand for oil goes back up. Because with so many oil wells switched off and so many oil companies going out of business, there might end up being less oil. Oil available than there usually is so if oil demand does come roaring back, there could be a shortage of oil available, and that would end up pushing the oil price backup still David Dekel bound. The oil analyst does not see that happening anytime soon. He does not think the US economy or the global economy will bounce back. He thinks it will probably be more of a shuttle. If you've seen the airlines commenting that likes they think. Air travel is going to get back to normal two thousand, twenty five. That's five years now, and even when the economy does recover David does not think oil will ever be the powerhouse industry that it used to be. Because for example there's the rise of alternative energy and also more fuel-efficient vehicles and move away from plastic and so far this week. Oil prices have been edging down on news that Corona. Virus cases are rising in the US, and if that keeps happening, it could just mean that the US economy will be growing really slowly for awhile, which could further mean oil prices? Themselves will also stay low for a long time, and that might mean that companies could need more storage soon. And, if that's the case, Sean lovelace water solutions will be ready until then. He says he's just going to focus on his regular business on storing water in his big above ground tanks, they actually store a lot of water sixty thousand gallons, which is about the size of six backyard swimming pools. Yeah, no, we can. Now we could have a big party with some big freshwater tank somewhere if we wanted to big big pools. Pool Parties John's. Yeah. Be there. Bring your mask. Bring bring your jugs. If you want to get into this oil storage, business yourself, you know. By the way don't do that in all serious that. Don't don't do that. This episode of the indicator was produced by Camille. Peterson and Brittany. Cronin the indicator is edited by Paddy Hirsch and is a production of NPR. Whenever you face a choice. It helps to think like an economist and this week on planet. Lenny summer school will start off our course. Economics with ink workout for your brain how to decide what's something truly costs? Planet money from NPR.