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Page added on March 11, 2016
A Barrel of Oil Costs Less than the Barrel It Comes in
Here’s a stat that illustrates just how much crude prices have fallen: a barrel of oil costs less to buy than the actual barrel it comes in.
That fact comes courtesy of Nicholas Colas, chief market strategist at Convergex, who calls oil “the Kim Kardashian of asset classes,” in a Friday note because of the attention it’s commanded across the markets of late.
Some online shopping on his part showed that barrels price between $50 and $200. Here’s one in the upper price range…
…while this one looks like more a of a bargain…
By contrast, crude oil for April delivery settled at $37.84 per barrel on Thursday. It’s up about 1% Friday, adding to a 12% rally this month, but still down 20% from 12 months ago.
Mr. Colas’s range for barrel costs is quite large, meaning that even at oil’s peak, some barrels could still be more expensive. As such, the stat really doesn’t speak to the relative cost of storing oil. Nonetheless, storage costs have risen recently amid an excess of supply. That’s prompted some to seek out unconventional places to store oil, such as empty rail cars, as The Wall Street Journal reported last month.
The stat puts into relief that oil prices are down 74% from their record high in 2008. That’s driven major changes across asset classes and within the oil industry itself.
“Reality has begun to bite as low oil prices have continued to take their toll,” said Royal Bank of Canada strategists, led by Helima Croft, in a note. “Even if the recent uptick in oil is sustained, the vast majority of sovereign producers are facing difficult outlooks for the rest of 2016.”
10 Comments on "A Barrel of Oil Costs Less than the Barrel It Comes in"
makati1 on Fri, 11th Mar 2016 7:13 pm
Perspective. Always put things into perspective to get the real picture. The photo of a tree is meaningless if there is nothing to judge it’s size by. It could be 20 feet high or 200.
rockman on Fri, 11th Mar 2016 10:05 pm
What a waste of space. Hopefully everyone here understands that a “barrel” is a volumetric measure and not a physical entity. IOW in 40 years working in the oil patch the Rockman has not seen a single metal barrel containing oil.
The only question is whether this is a tentional joke or unintentional stupidity. LOL.
ennui2 on Sat, 12th Mar 2016 9:38 am
News flash to peakers:
It’s a glut 🙂
Boat on Sat, 12th Mar 2016 10:42 am
Iran plays hardball with European oil buyers, slowing exports
http://www.reuters.com/article/us-iran-oil-exports-idUSKCN0WB0LL
Iran has not added to the glut near as fast as projected..
Davy on Sat, 12th Mar 2016 11:02 am
“it’s a glut” is like says it’s raining. How is it raining and what danger does that put you in? Has it rained recently? Is it flooding? Is it a flash flood rain? Is it a “popcorn fart” rain that evaporated as soon as it hit the ground? That is what intelligent people ask about the rain
twocats on Sat, 12th Mar 2016 11:21 am
“When you ask them: “Why are your prices so bad?”, they tell you: “You see – you are asking and that means you are interested.” [reuters article]
Classic! I’m not an expert on persian culture, but this logic very much reminds me of my persian friends. i know they’ve got that bullshit Islamic thing going on, but the roots of Persian culture, fed by Zoroastrianism, is definitely something to be admired.
GregT on Sat, 12th Mar 2016 1:32 pm
Using the ‘logic’ of the intellectually challenged e-CON 101 zealots among us, with oil prices over twice what they were 12 short years ago, and rising, we must have a serious shortage of oil.
There can be no other possible explanation.
GregT on Sat, 12th Mar 2016 1:48 pm
Upon further reflection, I have come to the conclusion that most of those zealots were probably in grade school 12 years ago, so they do have an excuse. Those older than that?
Not so much.
makati1 on Sat, 12th Mar 2016 7:24 pm
rockman, I think most of us here know it is not shipped in barrels,but it makes a great perspective on the ultra cheap price of oil energy today.
A barrel (42 gal.) of milk costs more than a barrel of oil, although the energy content of milk is a small fraction of oil and is renewable. Even bottled water is more expensive than oil. It is proof that we do not value the very source of our comfortable life.
The term “intelligent ape” describes the Orangutan better than it describes humans.
onlooker on Sat, 12th Mar 2016 8:02 pm
“It is proof that we do not value the very source of our comfortable life.” It is also, proof on how we are fixated on economic growth at all costs. And OH BOY are their costs and mounting ones at that.