What We Know on the Global Crude Oil Glut

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What We Know on the Global Oil Glut

As profits in the petroleum industry take a plunge due to the ongoing global pandemic caused by the coronavirus, oil depots are being flooded with overflowing masses of crude oil that is now needing to be stored. The U.S. Energy Information Administration ([EIA] reported that tank farms which store the crude oil are filling up, and fast. With so much oil continuing to build where will all this excess oil go?

According to energy experts, the world has an estimated storage capacity for up to 6.8 billion barrels, and now 60% of that storage is nearly filled! The EIA also said that there are about 160 million barrels of oil in storage tanks just awaiting buyers. However, crude oil isn’t the only thing that is needing storage. Because of the 42 U.S. lockdowns, the demand for gasoline has fallen by 32% earlier this month, (compared to the same time last year). Since there is not much-commuting happening, work at oil refineries are currently on pause, meaning the crude oil won’t get turned into petroleum used for motorized vehicles.

Remember The 1980’s Oil Glut?

The demand for oil has already dropped by 20% since the last quarter of 2019, which has caused oil prices to be at an all-time low. Oil prices today have dropped due to the overflow of oil with very few buyers available to purchase.

In January of 2020, the oil price was about $64/bbl (per barrel) and is currently at $33.92/bbl. According to The World Bank, oil prices are expected to average to $35/bbl, before recovering up to $42/bbl by 2021. Experts anticipate prices to rise by 2021; once mitigation measures lessen, the demand should rise back up.

We haven’t seen anything this alarming since the 1980’s oil glut when there was a surplus of crude oil caused by a falling demand. Former CEO of British Petroleum reminded the world that the 1980’s oil glut lasted almost 17 years, and lack of storage was a key player to the issue at hand.

At this point, you might be wondering where will all this excess oil go, and where can it be stored? Crude oil can be stored in very limited places such as inside frac tanks, pipelines above and below ground, and even underwater. But Stuart Porter, who is a manager atAdler Tank Rentalsclaims “the industry is really scrambling to source viable storage options.”

So if storage is what we need, then where we find it?

Caliche Development Partners located in Houston, TX is planning to open a newly completed 3-million-barrel underground salt-cavern for crude oil or gasoline. Oil marketers are busy reserving storage for their clients, and they better hurry because according to Joshua Wade, “the party is almost over,” and the costs are continuing to rise. John Roby, who is the CEO of Teal Natural Resources claims it could cost him up to $300,000 a month just to keep oil stored!

The Oil Industry at JJC

At J. Joseph, we deliver property tax services across a wide spectrum of industries, including the oil and gas industry. With the global demand of oil being at an all-time low, now might be the perfect opportunity for you to consider turning your property tax liabilities into profits. If your business has been affected by the current global pandemic, or you’re ready to start saving, Contact Us — we’ll provide the best solution to keep your business moving forward.

As proud members of the National Association of Steel Pipe Distributors, one of our primary goals is to be able to provide you with our best strategy for a successful business by reducing your property taxes and staying in control of your property tax liabilities.

With the global demand of oil being at an all-time low, now is the perfect opportunity for you to consider turning those property tax liabilities into profits. Click Here to see our top three recommendations that are used by fellow NASPD members that helped save them over $32 Million.

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