Something weird happened on the oil market last week. For a few minutes on April 20, the price of a barrel went negative for the first time ever. The unprecedented collapse of prices is linked to the pandemic, which has caused people to stop doing oil-guzzling things like flying and driving. There’s now so much extra petroleum on the market that the world is running out of places to put it. If you’re an oil producer, it seems like the sensible thing to do in this situation would be to … stop producing so much oil.
On Friday, members of the Organization of the Petroleum Exporting Countries, Russia, the US, and others will begin scaling back their production by nearly 10 million barrels per day. They hope that this will help stabilize prices and take some pressure off of producers and refineries that are scrambling to find a place to store the excess. But the rollback isn’t likely to be enough. Oil producers would have to reduce production by almost three times that amount to match the downturn in demand. So why don’t they?