Unfortunately you've got a massive term mismatch. You have negative prices today, but a lot of reason to believe that by the time you could bring your storage online the problem will already have resolved itself.
Oil briefly went negative a few years ago. If you decided to build a storage business dependent on negative oil prices for profit, you might just be coming online around now, and very much poorer than you were before. (Of course you would in fact have stopped a long time ago.)
The negative price was caused by all the storage tanks being full. If you've got no storage you can't take delivery so you have to pay someone to take the oil off your hands.
Oil went negative in the same way the price of my trash is negative: more of it was being produced than people wanted to buy, but the producer had to get rid of it because they couldn't stop production. As another commenter said, you can just walk away from a digital asset, so this isn't a problem. I can't walk away from my trash.
It is a question of whether it will cost more to store the oil than it does to "sell" it at a loss.
That said, I doubt many producers truly sold for negative prices. The negative prices were a commodities market effect where traders were required to pay to offload their futures contracts in order to not take delivery of the oil. In other words, I suspect the commodities traders bore the brunt of the negative pricing.
Right, but the reason it went negative is that there was no place to store the oil (demand for storage went through the roof because demand for actual oil plummeted). So that if you held one of these contracts, you had to pay someone to store your oil (directly or indirectly, if doing a cash-settled contract). If the people in the article did cash-settled contracts they would have been in just as much trouble.
The price of the oil is based on what someone is willing to pay for it (QED.)
Right now, nobody wants to buy the oil to actually use it.
So the only buyers are people who are willing to store it now, in order to sell it later when the price is better.
Those people are "pricing in" their costs to store the oil in what they're willing to pay for it on the spot market.
As storage becomes more expensive to procure (demand for it is rising, all the "cheap hotels" are sold out, etc.), the price for oil goes down further to cover those costs of storage for it.
Ultimately, the negative prices are a reflection that nobody wants that oil now, and the more negative, the more a reflection that nobody is going to want that oil for awhile.
So the price of oil at the moment is a function of time (how long no one will want the oil) and the available supply (and therefore price) of storage for the period of time when no one wants the oil.
The price of oil was negative because no one had any place to store the oil and they absolutely needed to take delivery of it. It’s a very different issue.
It's not just the best time to build reserves; there's so much oil out there that prices dipped to negative values in some spots (yes, they would pay you to just come and collect the oil; if only you could). Oil is energy, this is similar to the occasional negative electrical energy prices in renewables-rich countries like Germany.
Oil barrel (futures) prices dropped into the negatives in 2020, which meant people were literally paying to give their barrels of oil away [0], driven partially by storage concerns.
So I guess, in a sense, what you're asking about did happen?
I would say that negative prices are very _discouraging_ to continued use of fossil fuels, since it's hard to get investment for additional oil drilling capacity when the prices are negative.
Yes, in the strategic oil reserve there was, but not in many other oil storage facilities, and government buying processes for everything are slow and complicated. However, the negative prices aren't for oil as delivered where you want it. It is for oil coming out of a tap at a storage facility somewhere in Illinois (or rather, entering a tank that you rent in that storage facility). All of those tanks were full when oil prices went negative, and there wasn't enough demand to transport oil out of that facility. Most storage facilities were full, and new ones couldn't be built in time.
But a month from now their storage will be full so they could be a lot more desperate. Full storage was one of the factors for the negative oil prices some time ago happening in the US.
Sour Crude in some areas of the US hit negative values a few weeks ago. It means that supply has grossly outstripped demand, and that storage of the good has become the primary cost.
In the case of banking, it means that liquid cash has become so worthless (ie: too many people are saving money) such that the Banks are now charging you for the privilege of keeping the money safe.
The capacity is already "purchased", so even though it's available from a physical point of view, from a monetary one you need to pay a lot. That amount you need to pay to rent storage is the cause of the negative barrel prices.
An active oil well produces oil every day, whether you want it or not. When demand abruptly dropped, crude started piling up at storage facilities, leading the price of oil to drop below $0[1]. Cutting production is a rational market response when wholesale prices are negative.
Oil briefly went negative a few years ago. If you decided to build a storage business dependent on negative oil prices for profit, you might just be coming online around now, and very much poorer than you were before. (Of course you would in fact have stopped a long time ago.)
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