Oil has become incredibly plentiful and cheap recently. So cheap, in fact, that at least one company has suggested that buyers should be paid to take a certain type of low-quality crude. The company is owned by billionaire brothers Charles and David Koch. And last week,says The Denver Post, they offered to pay negative 50 cents a barrel for a type of crude known as “North Dakota sour.”
The negative price is due to the lack of pipeline capacity for the oil. But it underscores how dire things are in the U.S. oil market. Two years ago, by comparison, North Dakota sour was selling for almost $50 a barrel. As a result of the negative price, some producers are considering closing down their operations. One Houston oilman said, “Telling producers they have to pay you to take away their oil certainly gives the producers a whole bunch of incentive to shut in their wells.” A Dallas oil exec agreed. “You don't produce stuff that's a negative number,” he said.