Crude oil prices have dropped below $12 per barrel. I’ve been wrong in previous columns about what will trigger oil-price declines. Today, for the first time, I’m wrong. As Paul Krugman put it:
According to the most recent reports, some 10.6 million barrels of crude oil inventories may be currently in storage. This is more than 1.3 million barrels per day, which is almost twice as much as the rate that would normally be expected to produce a modest crude-oil glut. Moreover, it’s the second-largest total since January, 2011.
So to sum up, we now have the largest crude-oil glut since 2011; there are twice as many crude-oil storage facilities as normal; and the level of stockpiles is far larger than we would normally expect.
And just in case you’re wondering, of course, you can’t bring crude oil to market using tankers: It can only be brought to market via railcars. Yet since the election, we’ve already seen a major surge in shipments of crude oil by rail, largely due to President Trump’s anti-regulatory policies. “Trump has a chance to get oil moving again,” Victor Shum, vice-president of energy consulting firm Purvin & Gertz, told the Wall Street Journal. “It’s probably one of the biggest efforts he’s made so far.”
So, despite all that, we’re now heading back toward another boom, unless production starts to decline — which could be a risk if the trade war escalates.