You may have seen images of dairy farmers pouring milk down drains. That’s caused by supply backups: There’s more milk than people want to buy at the moment, and the product is perishable.
In fact, that very phenomenon has been happening just this month as the coronavirus drastically reduces how much milk, cheese and butter schools and restaurants are buying, far more than can be offset by people buying more gallon jugs for home consumption.
Because of situations like these, for many decades the federal government has propped up dairy farmers, through a complicated series of subsidies, to keep them in business and make sure prices remain stable. It’s necessary for us to enjoy those foods that I and so many others love. I don’t begrudge government help in that case because we would not have a crucial product as a nation without that assistance. Simply put, don’t mess with my cheese!
Now what about oil?
That industry is facing an unprecedented supply glut also caused by the coronavirus. Drivers and industries aren’t using oil products because they’re locked down from the COVID-19 outbreak.
And in this case you can’t pour it down the drain: Oil is a pollutant, it’s not perishable and there’s a finite world supply so you’d hate to waste what we have. But the oil has got to go somewhere, and it’s rapidly backing up in refineries, pipelines and storage tanks.
But the U.S. government does not have control over supply and pricing like it does in the dairy industry. Our dairy products are mostly made and used in America, but oil is used everywhere and produced all over the world. There’s little hope that American attempts to limit supply would raise up the price of oil, as we found from a well-meaning deal between the U.S., Saudi Arabia and Russia to limit how many barrels they produced. That measure did nothing to stop futures prices this week from falling into negative territory, which means oil producers are willing to pay someone to take oil off their hands. If nothing else, the idea of “black gold” becoming worthless illustrates the incredible situation our world faces right now.
Negative future oil prices are causing unbelievable strain on the world, national and local (where so many in Marion County work in the oilfields) economies and poses perhaps the biggest threat of all from the pandemic. So what are we to do?
Two suggestions:
1. Don’t panic. The market will be correcting itself as oil firms stop pumping more from the ground and enterprising people figure out ways to take and store the excess supply to use when times are better. As President Trump said in a Monday press conference, “Nobody’s ever heard of negative oil before, but it’s for a short-term.”
2. The problem is not going to go away until the nation reopens for business, so we’ve got to rapidly move toward doing that.
The coronavirus, although very serious, has not proven as deadly as experts initially predicted. It has also not been as catastrophic in rural places like Mississippi as in urban centers like New York. Testing capacity has grown rapidly over the past month, and people have shown a willingness to follow government safety guidelines that promote sanitation and staying away from others who may be infected.
All of those are positive signs that it’s time for the government to methodically begin lifting the “shelter-in-place” orders, as Mississippi Gov. Tate Reeves has shown that he’s open to doing.
We’re reaching the point where the economic suffering is going to eclipse the health suffering. In that case it’s logical to treat the place where the most pain is. I’m increasingly optimistic that we can do that without causing the virus to jump back up and bite us.
Charlie Smith is editor and publisher of The Columbian-Progress. Reach him at 736-2611 or csmith@columbianprogress.com.
