The cost of West Texas Intermediate (WTI), the crude oil benchmark used to price fuel in the Dominican Republic, went below zero on Monday, 20 April 2020. It has since recovered slightly over zero.
The explanation for the drastic drop in price was that traders were desperate to find buyers who had sufficient storage capacity for fuel deliveries. The collapsing global demand for fuel has sent prices to all-time lows. Oil stocks are not moving with people staying at home and airplanes grounded.
Economists say that the long-term future of where oil prices will settle are heading remains unclear. The extent of the economic damage caused by the Covid-19 has yet to be understood.
Prices had been sliding. A barrel of WTI had cost around $60 at the start of 2020. From a price of US$18 on Friday, 17 April, the price plummeted to below zero on Monday, 20 April.
In the Dominican Republic, a major importer of fuel, the price drop is a mixed blessing for the government. While costs are lower; on the other hand, the government has lost a major source of income. Fuel taxes have traditionally been one of the best performing taxes.
Much of the price of fuel today consists of taxes and duties. Retailers would like the pump prices to stay high to compensate for their own lower sales volumes and avoid station closures. Gas stations in the Dominican Republic have been regarded as essential services and have remained open outside of curfew hours.
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Houston Chronicle
Business Insider
NPR
21 April 2020