You Have to Pay to Give Oil Away

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“Crude costs money again” is a strange headline for strange times. The price of a barrel of oil for delivery in May dropped below zero yesterday: West Texas Intermediate crude, the U.S. benchmark, closed at around -$38. It bounced back above zero, briefly, in early trading today, before falling back into negative territory. Market watchers are trying to make sense of it all.

Technical factors explain some of the decline. The soon-to-expire May contract went negative on thin volumes, while the more heavily traded June contract has remained above zero. In essence, traders don’t want to be stuck taking delivery of any oil now — storage is nearly full and demand is nonexistent — but they think that production cuts and a gradual reopening of the economy will make oil worth something in the future.

The ugly economics of the industry are also to blame. The production cuts that major oil powers agreed on this month aren’t enough to offset the steep drop in demand with much of the global economy in lockdown — so much so that Saudi Arabia and other OPEC members may start cutting a few weeks ahead of schedule, The Wall Street Journal reports.

They’re doing so despite the debate over coronavirus testing. Other states are arguing that they can’t reopen because there isn’t enough screening for the virus. An official with the W.H.O. warned this morning that the lifting of lockdowns must be gradual to avoid a second wave of infections.

• Denmark, which has opened some schools and businesses, has pledged to test everyone with symptoms.

Steven Davidoff Solomon, a.k.a. “The Deal Professor,” is the faculty director at the Berkeley Center for Law, Business and the Economy

If past crises are any guide, the big technology companies are about to sidestep antitrust laws and get even bigger.

Consider last week’s decision by British regulators to allow Amazon’s investment in the London-based food delivery start-up Deliveroo. Amazon said last May that it was joining a $575 million fund-raising round, valuing Deliveroo at perhaps as much as $4 billion. Britain’s Competition and Markets Authority halted the deal because it thought it might be bad for competition.

That was before the pandemic.

Deliveroo argued that, without Amazon’s money, it would have to shut down. The British antitrust authority backed down, saying that if Deliveroo went bust, it “could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality.”

Expect this to be repeated elsewhere. In the U.S., big companies will take advantage of the so-called failing firm exemption to antitrust law. This doctrine, which dates from a 1930 Supreme Court case, allows otherwise anticompetitive deals to succeed when the target would probably fail without the deal and there is no other viable investment. American Airlines used it when buying TWA.

Consolidation is natural during troubled times. Recall how the biggest U.S. banks gobbled up failing competitors during the 2008 financial crisis.

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