by Bill Ball
In a historic turn of events, the oil price plummeted to -$35/bbl on April 21, 2020. This unprecedented crash sent shockwaves through the global economy and left many wondering how such a thing could happen.
The COVID-19 Pandemic and Its Impact on the Oil Industry
The primary cause of the oil price crash was the COVID-19 pandemic. The pandemic brought global economies to a standstill, with travel restrictions and lockdowns leading to a dramatic decrease in energy consumption. As a result, oil production continued unabated, leading to a glut in the market.
Storage Facilities Reach Capacity
With demand plummeting and production continuing, storage facilities quickly reached capacity. Refinery tanks were full, and supertankers laden with millions of barrels of crude oil sat idle at anchor worldwide. The oversupply of oil and the lack of storage space led to a sharp decline in prices.
Past Pandemics and Their Economic Impact
The COVID-19 pandemic is not the first to wreak havoc on the global economy. Throughout history, pandemics have caused economic ruin, famine, and death. The Black Death, for example, wiped out one-third of the world’s population in the 14th century. The Spanish Flu of 1918 killed an estimated 50 million people worldwide.
The Vulnerability of the Oil and Gas Industry
The 2020 oil price crash highlighted the vulnerability of the oil and gas industry to global events. While the industry has since recovered, it remains susceptible to boom-and-bust cycles, climate change, and the looming threat of future pandemics.
Conclusion
The day oil went negative will be remembered as a watershed moment in economic history. It serves as a stark reminder of the interconnectedness of the global economy and the far-reaching impacts of pandemics.
Read the technical paper, The Day When Oil Went Negative
Bill Ball is a senior staff consultant to KBK Industries with over 50 years of oilfield engineering experience and holder of twenty-three oil and gas industry related US patents. His credentials represent the culmination of a lifetime of breakthroughs and innovations. Bill’s twenty-three US process equipment patents speak to this. His first patent has become an industry “game changer.” It is the industry’s first true oil-water separation “skim tank”, the “HWSB”. Today there are over 3,500 HWSB® skim tanks separating and capturing oil that used to be injected and lost forever. Bill resides in Bixby, a suburb of Tulsa, Oklahoma.