Negative Oil Prices Explained.

It goes without saying that oil should be a relatively valuable commodity, given how useful it is, how limited its supply is and how expensive its alternatives are. BUT just earlier this week we have started seeing articles noting that oil prices have now gone into the negatives. People are literally paying to give other people one of the most influential and useful commodities in the world.

So what is going on here, how does this make sense? We as always with these weird and wonderful things it all basic economics and to properly understand this we are going to need to look at 3 things,

Negative value items,

The 2020 oil market

And

How we actually sell oil.

#oilmarket #recession #economics

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References -

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

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

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