Petroleum’s horrendous tumble this week began Monday, fueled by a strong U.S. dollar and general concerns about slackening demand. The decline gained momentum on Wednesday as the International Energy Agency (IEA) reported an inventory build of 2.4 million barrels of crude. Thursday morning, the crash accelerated by $6 per barrel on worries the AstraZeneca vaccine rollout in Europe would reduce demand further, especially from the transportation sector.
Longer term, the IEA predicted gasoline demand would never return to pre-pandemic levels since the demand for electric cars will be increasing. Most major automakers have pledged to switch entirely to electric cars in the next couple of decades. Electric cars currently make up about 4 percent of auto sales. Gasoline is the largest component of refined products from each barrel of crude; diesel fuel, home heating oil and jet fuels comprise the balance.
Crude oil for April delivery traded at $61 as of midday Friday, down $4.50 from last week. April gasoline was at $1.94 per gallon, whereas April heating oil was at $1.81 at noon on Friday.
Crude as the King of Commodities
Virtually everything Americans buy is made possible by crude oil. Humans used wood as fuel for tens of thousands of years and coal for nearly 100, but the discovery of black gold in the late 1800s changed the face of the earth. Western nations developed technology to extract and refine crude deposits into the fuels that drove virtually every aspect of the Industrial Revolution. Within a few decades, our agrarian population changed from growing and harvesting crops by hand with the help of livestock into urban populations making everything with the help of fossil fuels. All of our crops now depend on fuel for planting, fertilizers, pesticides, harvesting, packaging and transportation to markets. All have become available due to cheap, abundant supplies of fossil fuels or electricity generated from its burning.
Climate Change and Plans to Capture Carbon
The status of crude is quickly changing, however, as scientists and our younger generation become more concerned about climate change, pollution and the availability of clean water. Carbon dioxide capture and carbon sequestration are gaining attention from both governments and producers of energy and agricultural products. What if farmers got paid for reducing tillage, planting cover crops and reducing nitrogen released from their farms? The use of more renewable or biofuels may also expand as part of an effort to make ag more sustainable.