On Monday, the price for a barrel of crude oil crashed so hard that it tipped past zero and into negative territory for the first time. Per the West Texas Intermediary benchmark, on Monday afternoon a barrel of crude oil in the U.S. cost -37.63.
How can something really “cost” a negative amount? Many were quick to point out the literal concept: You’d be paid to take oil off sellers’ hands.
With reserves full, the market is awash with oil due to a price war between Saudi Arabia and Russia. Add to that the fall in demand for fuel worldwide due to the pandemic, and market conditions drove oil prices to the floor, and then through it.
A similar concept is playing out in trucking, with a market thick with truckers looking for work and demand for those services at dramatically depressed levels. Though rates don’t have a negative sign in front of them, in the worst cases they might as well. Many owner-operators report rates of $1 a mile, or less, advertised on load boards and by brokers directly. At prices like that, depending on your fixed costs, you just might in fact be paying to take loads off shippers’ and brokers’ hands.
The solution? Increasingly, it’s just to stay home until rates come back.
“I can’t work. I can’t afford to with the rates right now,” said Toma Tomov, an owner-operator out of Lincoln, Missouri. “If I go to work at the rates posted for loads right now, I’ll be paying out of my own pocket.” He doesn’t have a truck payment, “which is why I’m able to afford to stay home like this.”
Independent Timothy Barrett said roughly the same thing two weeks ago. “I am basically shut down,” he said. “I can go broke two ways: Hauling for nothing or not hauling. I’m not going to [run loads] and exchange money for fuel and drive the truck for free.” Like Tomov, Barrett’s 1997 Western Star is paid for. “If something starts popping,” he said, referring to loads coming back, “I’ll be there.”
