Coronavirus lockdowns have overturned the dominance of oil – the world’s most valued commodity. The worth of a barrel of US oil fell to less than nothing on Monday for the first time in history. This means producers ended up paying buyers more than $ 30 (£24) a barrel to get oil off their hands.
It rebounded slightly to just over $ 2 (£1.6) the next day.
Monday’s negative slide is because the world has more crude than it can use or store.
Storage facilities and even ocean tankers are filling up.
Fears of not finding a place to put oil in next month mean nobody wants crude, and that has led to a severe drop for West Texas Intermediate – a benchmark for US oil prices.
The collapse of crude oil threatens the global economy as it is already struggling to cope with the fallout from the coronavirus outbreak.
Economist reveals why we should welcome lower oil prices during coronavirus crisis
Coronavirus is threatening the global economy
However, in an exclusive interview with Express.co.uk, independent economist Shaun Richards claimed there is a reason why we should welcome lower oil prices during this crisis: their impact on inflation.
He said: “Lower oil prices means lower inflation, which is better for consumers and workers who will find that their wages go a bit further.
“This will help workers and consumers in terms of real wages in what are going to be hard times.”
However, he noted: “There are a couple of nuances to this.
“Let me start with the fact that as we are using less of it, the gains are reduced.
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Coronavirus: Economist reveals why we should be happy about lower oil prices
“The second is that there is also a switch from producers to consumers as oil producers will be hit hard.
“In fact there is an irony here because this is one of the causes of where we are which is the Saudi/Russian attempt to get the oil price below the break even for US shale oil wildcatters.”
Laura Suter, personal finance analyst at investment platform AJ Bell, echoed Mr Richards’ claims.
She told The Sun this week: “Oil prices have a massive impact on the UK’s inflation rate and with prices at the pump and home energy costs getting cheaper we’d expect this trend to continue for the next couple of months.
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“Savers will welcome the news of a drop in inflation, as they have been pummelled with two further falls in the Bank of England base rate this year and a multitude of cuts to interest rates on savings accounts.
“However, it remains the case that no easy-access savings account meets the level of inflation, but savers who are willing to lock their money up for a year can at least keep pace with inflation.”
Inflation jumped to a six-month high in January due to rising petrol prices.
Meanwhile, the Bank of England cut interest rates twice in March to help reduce the economic shock caused by the coronavirus pandemic.
The central bank in the US – the Federal Reserve – has also slashed interest rates due to the crisis.