My essay. “Let’s discuss U.S. oil production, consumption, imports, exports, supply, prices, & geopolitics,” had some errors.
One, in particular, is an opportunity to clarify the fact that oil production (supply) is constantly being adjusted to match demand (consumption). My essay said a large oversupply of oil occurred when the March 2020 pandemic hit, depressing prices from $100 barrel to $40 barrel.
Prices actually plunged and bottomed out around -$40 a barrel. That’s right, producers paid volume buyers minus $40 a barrel to take oil off their hands, because up to then production, consumption, and a normal supply chain were in operation.
Typical amounts of oil were produced each day (100-plus million barrels) and were already in the system based on contracts and sales as part of the regular workings of market-based supply and demand.
The system is mostly set up to move with one purpose and direction depending on predictability and sales. The pandemic changed things overnight. Predictability flew out the window. There was suddenly nowhere for a very large amount of oil to go. The market became unstable.
Only so much oil could be stored, the system couldn’t adjust that quickly and with not enough storage capacity, producers grappled with trying to adjust to the rapidly changing realities of massively reduced demand until production was brought in line.
With apologies, please find the corrected essay that was too late to make the print deadline here: https://archive.theisland360.com/readers-write/readers-write-lets-discuss-u-s-oil-production-consumption-imports-exports-supply-prices-geopolitics-2/
Stephen Cipot
Garden City Park
