Freaky-Deakonomics

I read an odd headline today. It said “Price of crude oil plunges below zero.”

Something like that takes a little time to sink in, so I will pause for a moment. OK, ready? Good.

As it turns out, crude oil is traded on the commodities markets as futures contracts, meaning you say today how many units you’re committing to buy at some point in the future for how much money. As near as I can figure, this is simply a way for people who have nothing to do with drilling, collecting, shipping, refining or selling oil to make money. From oil.

That said, I guess I am not terribly broken up that some rich people are losing an opportunity to get richer by buying low and selling higher. I am more upset that I cannot pull into my favorite Wawa, grab a coffee, fill my tank and have them pay me for the privilege. After all, if fuel costs less than zero, they should pay me to take it off their hands.

I will pay for the coffee because I am not unreasonable.

The thing I find interesting is how very basic concepts we all learned and have since forgotten have a way of showing up when you least expect them. Take supply and demand: We can all pretty much recite the basic premise that when supply goes up, demand goes down (less urgency) and prices drop. And when supply is cut, demand grows (more urgency) and prices spike. Some of us who pay attention (or listen to news radio on the commute to work, back when we used to commute to work) know that the oil producing countries in the world have a cartel that, when they are not getting enough money from the rest of us, agree to cut production to artificially reduce supply and drive up demand, along with prices.

Why is an oil cartel OK but a drug cartel is a criminal organization? I’m just asking.

In my opinion this is, to use a technical term, a dick move – especially when you have control over 1) a natural resource that 2) everyone needs and 3) will eventually run out, leaving absolutely no reason we should put up with your crap anymore, and by the way we have long memories so you better watch yourself.

So after generations of extortion and price gouging, not to mention global geopolitical upheaval, something completely unrelated happens somewhere in China and a couple months later almost no one is driving all around the world. Which means underground gasoline tanks are not emptying. Which means oil refineries are not pushing out product to refill them. Which means crude oil that’s drilled and collected has nowhere to go.

How do you like us now, Jed?

It would be nice if this was a satisfying tale of comeuppance, in which the evil foreigners who brokered our misery in the past met with a little thing called karma and hard lessons were learned. Sadly, it’s not that kind of tale.

I mean, yeah, a little. But just like there’s no direct line connecting Wuhan, China with my local Wawa coffee, assigning blame is as complicated as calculating the damage.

For one thing, the folks making money hand over fist aren’t only a bunch of faceless foreigners who are easy to dehumanize and blame. That’s too easy, and virtually never accurate.

[Important tangent: Any time someone tries to hand you someone who looks and sounds different than you as the author of your troubles and suggests that maybe if we do something to punish those specific people our lives will somehow be better for it, you should punch them in the face, say, “Get thee behind me, Satan,” and walk away. Also, do not vote for that person.] 

I’m not saying there aren’t horrible people who need to be punished or that we shouldn’t assertively defend our family and neighbors against such people. I’m saying if it sounds like it’s an easy solve, and completely someone else’s fault, then it’s a lie and probably in service of someone standing a lot closer to you than the ugly scapegoats are. Just my two cents.

Where was I? Oh yeah, how about the Wall Street speculators we started off talking about, the ones who are PAYING other speculators to take futures contracts off their hands? They are implicated. How about the big corporations who are motivated to make as much as they can as long as they can because they are owned by shareholders who want a return on their investment? (I’m actually pro-capitalism, folks, don’t get all bunched up. I’m saying the system is built on delivering profit as part of a free market, so that is what drives behavior. If you don’t like it, don’t go see Hamilton, no skin off my nose.)

OK, here’s one for the conservatives, then: How about the bloated federal and state governments, since more than half of the cost of every gallon of gas is made up of multiple taxes applied right there at the end of the supply chain, just because they can.

So blame is a broad landscape, but not nearly as broad as the landscape littered with collateral damage. Between the oil fields in the Middle East and your front door are millions of unintended and undeserving casualties. I can’t even list them all, but maybe this (true) turn-by-turn will help illustrate my point: 

Part of my job is ordering advertising specialties, the logoed merchandise on which Western business runs. In fact, my close friend at work used to joke that if I didn’t have a healthy supply of the latest logoed pens it would cause a global pendemic. Thanks, Melissa.

A lot of these things I affectionately call “trash and trinkets” come from China. A couple months ago, that supply dried up, invisibly, as manufacturing ceased somewhere I didn’t even know existed. Warehouses in the US began to empty. Then they closed. Then businesses like ours stopped buying nonsense like logoed pens because…logoed pens. And then one day, frighteningly quickly after the fecal hit the fan, all of a sudden my primary customer service person, my pen consiglieri, is laid off.

Barbara isn’t some greasy foreigner bent on global destruction. She’s a nice lady in New Jersey with a family who doesn’t have a paycheck now because I can’t buy pens.

There are millions of Barbaras out there, including people on my street, your block, every single neighborhood. They are the ones paying for crude oil that costs less than nothing. They are the ones who could use a free cup of coffee and a few free gallons of gas.

Assuming, that is, they have somewhere to go.