NEWS COMMENTARY

Negative oil prices show that it is in the interest of the oil industry to diversify feedstock

Published:
April 21, 2020
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Truly disruptive

The negative price for May WTI futures (-$40 per barrel) was probably an anomaly, but it also was a symptom of bigger underlying issues that the industry must address. Even though the oil industry theoretically has a diversified product portfolio, the current situation shows that its ability to switch between markets is extremely limited. The industry failed the stress test. It lacks the storage capacity and flexibility in its product mix and production capacity to gracefully handle a demand decrease. It is hard to change those parameters. The industry should focus on diversifying the feedstock for downstream. That way, it can more easily absorb supercheap oil and be more robust against price hikes in the other direction as well.

For the original news article, click here .


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