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The Oil Price Crash in One Word: ‘Inelasticity’

Supply didn’t fall and demand didn’t rise in response to the historic plunge in the price of crude.

The historic crash in oil prices on Monday—to below zero, believe it or not—can be explained with one wonky word: “inelasticity.”

The demand for oil is inelastic. It doesn’t respond dramatically to changes in price in the short term. When we’re cooped up at home because of Covid-19, we’re not going to do a lot of driving no matter how cheap gasoline gets.