WATCH: Eyewitness News talks to oil production expert about drop in gas prices

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EVANSVILLE, Ind. (WEHT) — For the first time in history, oil prices dropped into the negative territory on Monday.

That drop has caused some problems for oil companies in Southern Illinois, as they enter their peak season.

Analysts say, because of a price war on the other side of the world between Russia and Saudi Arabia, and a halt in travel, due to the coronavirus, there’s a surplus of oil.

Eyewitness News’ Brandon Bartlett spoke with Phil Barnett, an oil exploration and production expert, in Texas, via Skype.


Brandon Bartlett: Joining me now by Skype from Texas is Phil Barnett, an oil production expert. Phil, thank you so much for being with us, tonight. Now, these low prices that we’re seeing here in the tri-state – is this due to a price war between Russia and Saudi Arabia?

Phil Barnett: Well, I would say there’s probably “three legs to the stool.” One of them is definitely the ego-war between Russia and Saudi Arabia. The other is a bit of suffering the consequences of our own success, and being able to enhance production. And then, or course, you throw in this Chinese virus, which, uh, has disrupted everything. I think beyond all of that, programmed trading should be banned permanently, because that’s what happened yesterday, as the May contracts were closing, the algorithms are set to recognize certain patterns, and that’s why it artificially took us into ‘negative.’ Believe me – nobody is requiring me to pay them to take my oil, just like nobody is paying you when you fill up your tank with gas.

Brandon. Okay. Gas prices here in our region are around a dollar a gallon. So, with the price of gas even dropping into the negative category yesterday, is there a chance that those prices could go even lower?

Phil Barnett: Well, they could, and I wouldn’t be surprised to see things – not just in the nineties, but maybe even into the seventies, temporarily. But, believe me, it will be temporary. Because, while food is the basic element that we can tell with the demand on grocery stores, but, a more of an observation that a judgement is – it’s oil that courses through the cardiovascular system of the global economy, and that is the lowest common denominator. Because, you can’t plant a crop, harvest it or get it to market, let alone go to market, without that commodity.

Brandon: Right. Any idea how long prices might be this low?

Phil Barnett: Well, I would say, there will be a marked and steady recovery over the next 30 to 90 days. By the end of the year and by this time next year, we will probably see prices stabilize somewhere between $45 and $65, and then, both the price of oil, the price of a gallon of gas, and the overall economy in the United States, in particular, and then globally, will rise steadily, probably for the next ten years. And then, by 2029 or 2030, uh, have your powder dry, because the bottom may fall out for an extended period of time.

Brandon: I want to ask you, too. Why do prices vary per location? In Kentucky, we’re seeing gas for 99 cents. Then, across the river in Indiana, it’s around $1.19.

Phil Barnett: Well, I will tell you, uh, the oil that is harvested today does not become useable fuel for two to six months. So, everything that are in those tanks right now, was production that came out last year or the first of this year. There is more volatility in prices between the refineries, the distributors and the retailers. Because, what you will see is – when you see a precipitous drop in the price of a barrel of oil, you may see pennies, or even nickels or dimes in adjustment in gas. But, when the price goes up, you will see it skyrocket. There is not that direct relationship, because of the lag time that it takes to refine and process the oil into fuel. Now, having said that, that’s purely opportune seeking by individuals that may think that they can drop the price of a gallon of gas and get everybody there, but it has very little real relationship with what the price of the oil was that was being refined into those finished products.

Brandon: All right. A lot of great information, there. Phil Barnett. Live, tonight in Texas for you. Thank you so much for joining us, tonight.

Phil Barnett: You bet.

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(This story was originally published on April 22, 2020)

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