Think Oil Price Volatility Is Over? Think Again
There’s a bigger problem lurking in the market than the price of WTI.
Trouble coming across the tubes.
Photographer: Daniel Acker/BloombergThe best argument for taking a sanguine approach to oil prices collapsing into negative territory this week is that it’s strictly a local problem.
As my colleague Matt Levine has written, once you unpack what “oil prices” means, the bizarro-world implications of negative pricing aren’t so mysterious. It’s common to talk about West Texas Intermediate crude oil priced at Cushing, Oklahoma as if it’s a proxy for the oil market as a whole, but that’s never been the case. The world’s twin oil supply and demand shocks have made the shortage of storage and pipeline capacity at that specific location so acute that producers are prepared to pay to get their place in the queue. That need not have wider implications.