With the price of oil recently falling into negative territory - meaning the companies selling it were paying buyers to take it off their hands - does that mean we should expect petrol stations to start offering to fill our cars up for free, or even paying us to do so?
I, for one, am picturing a dream 7/11 scenario where I’m tempted in to take their fuel with the offer of free Krispy Kremes and Slurpees if I’ll just agree to fill my tank.
Frankly, just about anything seems possible - even a petrol price below 80c a litre in Australia - because we are living through truly unprecedented and even implausible times.
Last week, for the first time ever, the price of West Texas Intermediate, the US oil benchmark, plunged into negative territory. This wasn’t just surprising, it was - according to Wall Street veterans - “unbelievable”, “scary” and “very visceral”.
As one industry insider put it, people had always believed that a negative price for oil was simply impossible. Even the idea of the price dropping to zero, and thus erasing all value in the vast oil-trading market, seemed absurd, but oil companies paying people to take their oil? Never.
According to Rebecca Babin, managing director at CIBC Private Wealth Management, “it was a take-your-breath-away kind of scary moment. It truly was like watching a full-speed train wreck, but you couldn’t stop watching”.
The incredible run on the oil market has been caused by the sort of supply and demand example that even a child can understand. Oil is still coming out of the ground as fast as ever - oil wells can’t simply be turned off, and it makes more economic sense to sell it a loss, or even pay someone to take it, than it does to seal a well - but demand has fallen off a cliff.
With aircraft not flying and people driving a lot less than normal, global demand has fallen by as much as a third and worldwide storage for oil is filling up. Analysts fear we could reach what they call “tank tops”, or maximum capacity, in just a few weeks. And all this adds up to lower prices for oil and thus petrol at the bowser.
We joked recently about how it’s a shame you can’t stockpile fuel the way you can toilet paper, but it turns out some people are willing to try.
The Australian government, for one, has jumped in, buying $94 million worth of crude oil from America last week, when prices were super low. Incredibly, Australia doesn’t have the capacity to store all that crude, so it will be leasing storage space from the US Government. The bulk-bought crude will be part of our country’s emergency reserves.
In Queensland, there have been reports of stockpiling on a far smaller scale. Brad Hunter, a Brisbane-based reporter for the Australian Traffic Network, was so excited when petrol fell below 80c a litre for the first time in 20 years that he filled his scooter, his car, a 10L jerry can and three 5L cans.
RACQ spokesman Steve Spalding said there were plenty of reports of people stockpiling at service stations. "It's not unusual when the price cycles reach their low point, people do stock up on it," he said.
Unfortunately, Mr Spalding also pointed out that it’s not a great idea, because unless you own a commercial storage facility, petrol “does have a shelf life”.
"Once it reaches the fuel tanks in equipment like garden lawn mowers, it lasts for about one month," he explained.
While fuel prices have continued to drop across the country - ranging from 84c a litre in Adelaide, on average, to $1.25 in Hobart, with Sydney at 91c, Melbourne at 92c, Brisbane at 88c and Perth at 86c - the Australian Competition and Consumer Commission (ACCC) has raised concerns that retailers might be using the falling oil prices to increase their profits, rather than passing on the full benefits to consumers.
"At this time, the Australian economy needs all the assistance it can get, and lower world crude oil prices are one of the few positives from current world events," said ACCC chair Rod Sims.
"In the larger Australian capital cities, petrol retailers took too long to pass on the savings from the rapid drop in international oil prices, and this did not reflect well on them.”
Alex Forrest from RAC Western Australia was even more scathing, pointing out that big reductions in the international oil price had quickly been seen in a drop in the wholesale price of fuel in WA. “But much of this was not passed onto motorists at the pumps,” he fumed.
"While many in our community are struggling through one of the toughest times of their lives, fuel companies have been beefing up their profit margins on fuel, in some cases by upwards of 100 per cent.”
The good news is that the savings are here to last, at least for the rest of the year. That’s at least partly because the tax on petrol in Australia is linked to the Consumer Price Index (CPI), and because the cost of many things we spend money on - including fuel, but also childcare - is falling, the CPI is falling, and that will put further downward pressure on petrol prices.
The NRMA’s Peter Khoury believes we’ll have historically cheap fuel for at least the rest of 2020.
“Oil companies are not going to be giving petrol away for free,” he said. “But the falls we have seen and expected to keep happening even before the futures price fell out of the back of crude oil will now continue.”