Crude Oil In USA Drops Drastically To Ksh 10 Per Barrel

Can you imagine a bottle of soda being five time more expensive than a whole barrel of crude oil? Can you imagine a kilogram of sugar being 10 times more expensive than a barrel of crude oil?

For the first time in history, a barrel of crude oil in the United States of America traded at USD 0.01 or 10 shillings, a drop of more than 100 percent.

Currently, the price of refining and storing crude oil is more expensive than the oil itself. Let us say, currently, the barrel that stores the crude oil is almost 1000 more expensive than the contents. What happened?

According to West Texas Intermediate (WTI), oil prices in the US crushed to unprecedented lows on Monday as futures in New York ended in negative for the first time in history.

According to WTI, the supply of the crude oil in New York surged by more than 69 percent, overwhelming all the storage facilities.

The situation was so bad on Monday that traders were paying people to take their oil. The oversupply forced WTI to trade at negative (-37.63 USD), something that has never happened.

The oil industry has been weakened by the spreading Covid-19 after most governments that produce the same locked them down to limit the spread.

The commodity has further been weakened by the price wars between Saudi Arabia and Russia. Saudi Arabia stepped up the production of crude oil, flooding the markets leading to the drastic dropping of prices.

During the onset of Covid-19, the prices of a barrel of crude oil dropped by more than 30 percent to around 20 dollars a barrel “but nobody ever imagined that a time shall come when a barrel shall sell for 0.01 dollars.”

President Donald Trump of the United States of America had announced that the government was set to buy oil for the country’s reserves but concerns continue to mount that the storage facilities will run out of space.

“America will have so much oil that there will be no place to store,” said an official from WTI.

The impact of dropping global oil prices has been minimal on most African countries, including Kenya. It was only after Kenyans protested that the Energy and Petroleum Regulatory Authority (EPRA) reduced the prices of up to 14 percent.

For the first time in Kenya, the price of a liter of diesel is more expensive than that of Super Petrol but Kenyans still feel the price is still so high.

Diesel prices have declined by 4.0 percent to 97.6 shillings per liter from 101.7 shillings per liter. Kerosene prices declined by 19.0 percent to 77.3 shillings per liter, from 95.5 shillings per liter previously,

The changes in prices have been attributed to the decline in the average landing cost of imported super petrol by 34.6 percent to USD 309.0 per ton in March 2020, from USD 472.6 per ton in February 2020.