Megan Greene, senior fellow at the Harvard Kennedy School, makes the case against a U.S. bailout of the oil & gas industry, saying the business model for many companies was already broken before the history collapse in oil prices. Wild trading in an oil futures contract this week was like an alarm going off for a fire that firefighters already knew was burning.
In this case, the oil industry has been aware that places to store oil are getting scarce because of oversupply, but the crazy trading that sent the May futures contract for West Texas Intermediate crude into a 300% decline Monday (made possible by negative prices), highlighted just how real the problem is.
Simply, holders of the futures contract were unwilling or unable to accept delivery of the physical commodity, and they were forced to pay to get rid of it. In this case, the contract for an oil purchase went negative for the first time ever, and somebody in the market got badly burned.
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