How Oil Went From All-Time Highs To All-Time Lows in Just Over a Decade
The price of oil is currently a hot topic right now, as the war in Iran has sent the price of a barrel of oil shooting higher. Oil is extremely volatile and always has been.
Case in point? In July of 2008, the price of a barrel of West Texas Intermediate (WTI) hit an all-time high of $147.27. In 2026 dollars, this works out to $217.75/barrel.
In less than 12 years, the price of a barrel of WTI oil had plunged, and actually closed at -$37.63/barrel (that's negative) on April 20th, 2020.
In the summer of 2008, everything was going right for oil.
The economies of both China and India were rapidly growing, and they both had an insatiable appetite for the "black gold". Global production of oil was stagnant. Trading in the commodities market helped to push oil even higher, and we hit an all-time high of $147.27 on July 11th, 2008.
That peak certainly didn't last long, as the "Great Recession" destroyed demand, driving oil down to below $40 a barrel in December of 2008.
The price of oil remained depressed into the 2010s. Advancements in fracking and horizontal drilling allowed the United States to flood the market with new supply. In order to try and counteract the US shale boom, OPEC flooded the market with oil in order to try and bankrupt American drillers. This sent the price of oil to below $30/barrel.
The COVID-19 pandemic completely crushed worldwide demand for oil, as the world literally stopped overnight. Oil dropped quickly.
Financial traders who owned oil futures were screwed thanks to the main US delivery hub in Cushing, Oklahoma. There was nowhere to store the oil, which resulted in the price of the may contracts going negative, as they had to pay buyers $37.63 a barrel to take the obligation for them.
Traders, including many novices who figured that it was impossible for the price of oil to go negative, took it on the chin as they scrambled to unload their oil obligations.
In total, oil saw a peak-to-trough move of nearly $200 a barrel in just under 12 years.
A valuable lesson to be learned? Oil can always surprise you.
Source: Every Oil Crisis in Modern History
Filed under: General Knowledge
