For the first time in history the price of a barrel of West Texas Intermediate (WTI – US oil) turned negative, falling as low as MINUS $37.63. This came about as a result of two main factors, first until recently the leading exporters of oil – OPEC and Russia – had been in dispute about production levels and had actually increased the amount of oil that they were pumping out of the ground. This has then been coupled with the huge fall off in demand caused by the lockdown across the planet to combat the spread of the virus.
The cause of the fall to negative pricing is not just a simple case of supply and demand. As oil needs to be stored, which costs space and therefore money, when you run out of space to store oil you end up with a demand for oil storage… that’s putting the story into very simple terms, but what does this mean for the world of energy?
Put simply, its cheap. You will not have seen a drastic fall in prices at the pumps (as demand is low as we are all locked indoors!!) this fall though definitely benefits business energy buyers, cheaper gas as a result of cheaper oil which also leads to cheaper electricity as in the UK it is one of the larger components of our electricity generation mix while we shun coal and turn more towards greener, environmentally friendly sources…
With ongoing volatility in prices given oil producing countries rarely can agree on the actions they need to take, and the fact that oil production in some countries may no longer be commercially viable, we say take advantage of the current low pricing and secure energy contracts NOW. Contact us for any assistance or advice you may need.
Talking with Henry Bennett of Wokendon Wealth he comments from the perspective of a Financial Planner “What we have seen with oil prices is extremely unusual but we are going through a time of uncertainty. The key in such times is to focus on what is important to you, what you can control and where needed make changes taking appropriate advice. With my clients we have reviewed their planning making changes only if appropriate and considering the effect on their long-term plans.”
Perhaps the breath of fresh air the planet has had over the past weeks can be followed by a move to away from the addiction we have as a planet to carbon-based energy.
Here at UK Energy Management we view the current crisis surrounding the Coronavirus as a time where our clients need our advice MORE THAN EVER. Reducing cost is one part of what we do, but regulations still need to be met for many businesses and now is an optimal time to instigate energy and carbon reduction opportunities. We can also help with claiming rebates from energy suppliers, potentially freeing up some extra cash, which is helpful to many businesses NOW.
Contact us for more information, assistance, and advice on all your business energy needs.
Finally, we would like to wish all of you the best in these difficult times. May you and your loved ones stay healthy and safe.