Oil prices fall into negative territory

The oil industry, especially America's, experienced perhaps its worst day in history Monday, putting an untold number of jobs and investors at great risk for who knows how long.

Petroleum is a major underpinning of the American and world economies that thrive when prices are low. But, what sounds like great news for consumers is anything but.

With worldwide crude oil demand down by 30%, the price of West Texas crude oil has collapsed and then some. At the end of the day's trading, a seller would have to pay a buyer $37 a barrel just to haul it away.

Professor Severin Borenstein, a renowned energy economist at the UC Berkeley Haas Graduate School of Business, says producers cannot get the oil to where it would be worth over $20 a barrel on the world market.

"The problem is: you can get it from the Midwest to the Gulf Coast right now. The pipeline that takes oil from Cushing, Oklahoma to the Gulf of Mexico is completely full," said Professor Borenstein. Oil traders believe that storage tanks in the Midwest are full or nearly full with no buyers in sight. "And so, they don't want to buy oil," said Borenstein.

The other world benchmark, Brent Crude, is down by 62% since New Years and falling. Demand is so low, refineries are working at only 69% of capacity, a level not seen since the Great Recession. Oil refinery giant Marathon has closed three of its refineries including one in Contra Costa County.

Yet, many producers keep pumping because shutting the wells down may damage them or seriously decrease their future production. U.S. producers, with their higher production costs ,will be the first to shutdown, causing bog losses for their shareholders and bond holders.

"It's very likely that some of these companies will go bankrupt. But, if the price of oil were to go back up, they would start producing oil again," said Borenstein. But, demand for gasoline is down 50%, diesel down 30% and jet fuel down 75%.

As of Monday, the AAA Fuel Gauge Report says, the average price of regular gas across the nation is $1.81. That is 34 cents a gallon less expensive than a month ago and $1.03 a gallon less than a year ago.

In California, a gallon of regular gas is $2.81; 44 cents less than a month ago; $1.22 less than a year ago," said "Not sure how low it's gonna go. But, as long as it continues to drop, people seem to like it and they continue to come in," said Rotten Robbie Station Manager Ron Taylor.

"The retail prices generally fall much more slowly. It takes four to six weeks for a drop in oil prices to fully show up at the pump," said Borenstein. Some gas stations, in low cost states now have gas at under a buck.

In the rough and tumble oil futures market, where real money is risked on the future price of oil, a recovery to $30, is expected to take a year; two to three years to get back to $40 a barrel price, still well below prices in January.