Tags: Commodity News, Oil
: Oil and milk sector disruption paved a way to charity

Disruption in the oil and milk sector paved a way to charity

The negative price of crude oil in Cushing, Oklahoma, was caused by an apparent widespread forecasting error.

Financial investors in crude oil futures did not predict the quarantine nor its consequence. They had no idea that the global demand for crude would decrease close to 30%. By the end of April, this would take over the capacity of crude oil already extracted.

Building new storage is not easy. It requires environmental permits, which in turn need field studies. Construction takes months, not hours. Additionally, in the US, it is a criminal offence to drop crude oil everywhere. Investors’ faced inevitable confusion since the quarantines were sudden, and many contracts were signed in advance.

In the coming months, less crude will be extracted from the wells.

Oversupply of the milk market

Quite the contrary, disposing of fresh milk is legal. In the US, quarantines decreased demand for dairy products by 15% in April, according to the cooperative Dairy Farmers of America. It occurs because increases in dairy purchases by households may not offset decreases in purchases by restaurants, hotels, and others. Every day there are between 2.7 and 3.7 million gallons of fresh milk in the US that can not be left without milking. It could cause sickness in the cows.

Experts report that donating that milk to those in need would require pasteurizing it to kill bacteria like salmonella, packing it, and transporting to its destination. It raises the question, who would pay the costs?

In Florida, the mayor of the city of Miami Lakes has joined a citizen coalition to pay for the processing of leftover milk and direct it to those most in need.

The Oil and milk prices illustrate the complexity of the unanticipated consequences of massive quarantines. However, they opened up enormous opportunities to do good.

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