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🌍 Covering the latest from the U.S. economy, stock market updates, and financial trends that matter for everyday people worldwide. Perfect for anyone looking to build wealth, understand money, and make smarter financial decisions.
💰 Topics we cover:
• Personal finance & budgeting
• Stock market & investing
• Real estate & housing market
• Credit cards & saving tips
• Money mindset & wealth building
👉 Subscribe for more daily finance videos and updates.
#finance, #money, #investing, #personalfinance, #economy, #wealth, #budgeting, #financialfreedom, #stockmarket, #moneytips, #dailymotionfinance, #stocks, #etf, #retirement, #financialplanning, #wealthbuilding, #passiveincome, #investingtips, #marketnews, #trading, #realestate, #housingmarket, #propertyinvestment, #mortgage, #homeownership, #creditcards, #loans, #debtfree, #banking, #interestrates, #inflation, #recession, #usdollar, #globaleconomy, #usnews, #crypto, #fintech, #digitalbanking, #bitcoin, #blockchain
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NewsTranscript
00:00What's up you guys, it's Graham here. So I think we just unlocked the brand new infinite money glitch, because as of yesterday, April 20th, the price of oil futures went negative, which means it dropped below zero dollars. That's right, below zero dollars. As in, they'll now pay you to take delivery of oil, and that's never happened before in history. And this is for real, too. This is not some Robinhood infinite money loophole that's going to be fixed by a software developer whenever he stops posting about his spy puts on Reddit's Wall Street bets.
00:29These negative oil prices are serious, and oil companies are now paying people just to take delivery of their excess product. So in a remarkable, maybe once-in-a-lifetime event that's still on the front page of pretty much every major news outlet in existence yesterday, let's cover exactly what's going on, how on earth this could have happened, how oil prices went negative, how you can make money from this, and whether or not these headlines are blowing this out of proportion again, which I'll just be real with you guys, yes, they're blowing it out of proportion yet again.
00:56And we're going to be going over all of the juicy details you guys want to know as soon as you sma- no, wait, as soon as you obliterate the like button.
01:02I realize that pretty much everyone is saying that now, but we've got to show them that these like button smashers on this channel are the most powerful of all of them, so we have to do our part to destroy it, obliterate it, obliterate the like button.
01:15Plus, tomorrow is my birthday, so as an early birthday present from me, if you wouldn't mind doing that, it'd be greatly appreciated.
01:21So of course, with that said, here's what you came here for. Whoops, I hit that accidentally. There we go.
01:27First of all, here are the headlines that we're all seeing.
01:29Oil prices plunge below zero dollars. Oil prices turn negative. Oil prices dip below zero as producers forced to pay to dispose of excess. Oil crashes 305%.
01:41And the most shocking of all of them is this one. 90% of viewers have still not smashed the like button.
01:46Okay, that last one was photoshopped. Guilty, but in all seriousness, headlines like this start making us think,
01:52Wow, so the price of oil is now negative money, so that must mean it's going to be free to fill up at the gas tank, right?
01:57Wait, no, no, even better, I'm going to get paid to put gas in my Hummer H1.
02:04Mmm, that's going to be perfect.
02:05Well, not exactly, because like I mentioned earlier, that headline is slightly misleading.
02:09And even though oil prices did crash 305%, it doesn't tell you the entire story, and it doesn't exactly mean you're going to get paid to invest in oil.
02:19Kind of.
02:20Here's the issue right now. With the economy shut down, we're not using as much oil anymore.
02:24We're not driving around as much, if at all. We're not traveling, we're not going on airplanes, and we're certainly not going on cruises.
02:30Businesses and manufacturing have slowed down to almost nothing, and while all of that is going on, the demand for oil has plummeted.
02:36It's really just a matter of supply and demand, and right now there's a lot more supply than there is demand.
02:41However, that's just the tip of the iceberg, because even though demand has slowed down, production has continued forward as usual, even though we're using less of it.
02:49That's created a surplus of oil that needs to go somewhere, and that's where the problem comes up.
02:53Now, typically, you would think that the solution to this would be stop producing as much oil, right?
02:58Well, yes, that would be the ideal solution, but actually doing that is insanely complicated.
03:03That's because right now, during all of this, we have a good old-fashioned schoolyard standoff between different nations who all want to duel it out to try to be the main supplier of oil.
03:12And they've declared a good old competition as to who could stay in business the longest without going bankrupt.
03:17So I'm going to sum things up and clarify things in a way that'll make sense to everybody, so if you feel like I'm simplifying this a little bit too much, just let it slide, because this is roughly what's happening.
03:26Basically, Saudi Arabia can produce oil for just under $10 a barrel.
03:30Russia makes it for about $20, the United States ranges anywhere from $21 to $25, Canada around $27, and it goes all the way up from there.
03:38And the majority of the world's oil is currently being produced by these three nations, but the United States has slowly been catching up.
03:44Now, I feel like this is the point where we should all be gathering around a campfire at night, and Graham tells a spooky story to everyone, but I guess this is going to do on YouTube.
03:53This all began in 2016, when oil prices plummeted because the United States began ramping up its production, causing more supply to hit the market.
04:00Now, lower oil prices doesn't really matter that much to a place like Saudi Arabia, because as long as it's selling for more than $10 a barrel, they make money.
04:08But that's not a good thing for the United States oil companies who need oil prices to be above $20 to even turn a profit.
04:14And once prices drop below that amount, they start losing money on everything that they make.
04:18But once the announcement came that Russia and Saudi Arabia would not be cutting back on their oil production amid this whole illness, oil prices plummeted.
04:25And then they said, on top of everything, you know what? We're going to be ramping up production.
04:31We're going to start producing even more oil.
04:33It's basically like them saying, we're going to run you out of business.
04:36And even though it's going to hurt us in the short term, we're going to benefit long term because after this is all over, we're going to have a lot less competition.
04:43And that's what's happening now with negative oil prices.
04:46Now, when you hear negative oil prices, it doesn't actually mean you're going to get paid $30 just to take delivery of a barrel of oil, except it kind of does within this context.
04:56See, when you hear the term negative oil prices, it's referring to what's known as the oil futures, or more specifically, the oil futures of one supplier in particular known as West Texas crude.
05:06Now, anytime I mention oil futures, it's basically just an agreement that says, I'm going to be paying this particular price on this day, and on that day, I'm going to take delivery of the product and follow through with the agreement.
05:18In this case, people bought oil futures at a higher price, expecting things not to get so bad.
05:23And as the price of oil fell, it became apparent that those future prices became less and less valuable.
05:28So much so that they literally ran out of space to hold all of the excess oil.
05:32It's literally cheaper right now for people who bought oil futures to pay you to take it off of their hands than it is for them to take delivery of it and then have to figure out where to put it.
05:41Like, imagine you're selling koi fish.
05:42If there's a constant supply of buyers, you could sell your fish for a decent amount of money.
05:46But what happens if the demand for koi fish goes down, but your fish just keep breeding and then you have no place to put them?
05:52Well, at that point, you pretty much just have to give them away for free.
05:54But then what happens if you can't give them away and no one is taking koi fish, but your fish keep breeding and now it's going to cost you even more money to figure out where to store them?
06:03Well, at that point, you have to pay people to take these fish off your hands, and that's basically what's happening with oil.
06:09They've run out of space to put their oil, so it's cheaper for them to pay you to figure it out than it is for them to find a storage solution.
06:15And because they're out of storage on very short demand with future contracts that expire today on April 21st, the price of oil went negative just as an effort to get people to take it from them.
06:26Unfortunately, though, storing oil is not something that, like, you and I can do in our spare time.
06:30It's not as though you could go and drain your pool, fill it up with a whole bunch of oil, and then get paid $40,000 a contract, although that would be pretty cool.
06:38Instead, storage could be rather costly, like with this giant oil tanker, which would store 2 million barrels for the bargain price of $335,000 per day.
06:48So no, it's not like the average Joe can just show up at the refinery today, take delivery of 1,000 barrels of oil, get paid $40,000, and then put that oil on, like, a 50-acre property somewhere until the prices go up.
06:59It doesn't work like that, unfortunately. Sorry to be the bearer of bad news.
07:03Anyway, when you see negative oil prices, it's only referring to the contracts in May for one particular supplier that expire on April 21st.
07:11And for future months, since now you have some time to figure out where to store all of this excess oil, prices are trading at more reasonable levels.
07:18They're not negative right now.
07:20Although the reason why oil is sold in futures like this is actually really interesting, and here's how that works in terms of our koi fish example.
07:26Let's say you're a koi fish breeder, and you know you're going to have 100 koi fish for sale at the end of the year, but you don't know what the current market price of those fish are going to be by the time they're actually born.
07:36So you could go and sell the rights to someone else to buy the koi fish at a future price, where basically they say,
07:42I'm going to pay you up front $20 a fish, and I'm going to take delivery of those fish in December.
07:47Well, if the price of the koi fish goes down by December, well, that works out in your favor, because you sold half of your fish up front for a higher price, and then you could sell the remainder of those fish at market value.
07:57But if the price of koi fish ends up going up by December, well, at least you locked in a rate up front for half of your stock.
08:03The person who paid $20 can now resell them for a profit, and you have half of your excess inventory that you could sell at market value.
08:11And that's exactly how oil works as well.
08:13But why then the sudden drop in prices?
08:15Well, that's because this particular refinery needs people to come and pick up their oil today on April 21st.
08:21And because there's a lack of storage, people would rather just pay someone else to deal with it than they would to take delivery and then figure out, like,
08:29wait a second, where do I store all of this oil that I agreed to buy?
08:32Now, as for whether or not this is going to save you money when you go and fill up with a gas tank, the answer is kind of a yes and no.
08:38Yes, lower oil prices do mean that your gas becomes cheaper.
08:41But the price of gas that you pay is made up of several different factors as well, such as distribution, refining, taxes, and then the cost of oil itself.
08:49So all in all, you're still going to have to pay to put gas in your car.
08:52It's not going to be free, and no, you're not going to get paid to do it.
08:55Although, like I said, it's most likely now going to be a little bit cheaper than it was before.
08:59Now, as far as what this means for you and I, if this keeps going for much longer, some U.S.-based oil and gas producing facilities could end up going out of business and shifting our reliance to foreign oil production.
09:09And once prices go back up, eventually we're going to end up paying more money for gas because now there are going to be fewer companies producing oil.
09:16And we have no idea how severe this is going to be or how low oil prices will have to go for this to happen.
09:21Eventually, some companies just can't run at a deficit forever and will have to shut down, although we don't exactly know when this breaking point is going to be.
09:28But if you want to make money from this, then most likely you're either going to be investing in or shorting oil and gas companies.
09:34And I'll be honest, when it comes to this, I have no idea what's going to happen, and I'm not investing in any of this myself.
09:39I'm more interested in the broad implications for the entire market than I am with this about trying to make a quick profit.
09:45But hopefully this explains the situation, and then from here you can make your own decision as to what you want to do with it.
09:51And who knows, maybe the Fed is going to start buying oil contracts too, with all of that excess money coming from the imaginary money printer.
09:57So with that said, you guys, thank you so much for watching.
09:59I really appreciate it.
10:00As always, if you have not already smashed the like button, make sure to smash the like button, subscribe button, notification bell.
10:06Feel free to add me on Instagram.
10:07I post it pretty much daily, so if you want to be a part of it there, feel free to add me there.
10:10As on my second channel, The Graham Stephan Show, I post there every single day.
10:13I'm not posting here.
10:14So if you want to see a brand new video from me every single day, make sure to add yourself to that.
10:18And lastly, if you guys want two free stocks, use the link down below in the description.
10:21Webull is going to be giving you two free stocks when you sign up on their platform and deposit $100,
10:25with one of those stocks being valued up to $1,400.
10:29So if you want the two free stocks, it takes only a few minutes.
10:31Feel free to use that link down below.
10:33Thank you so much for watching, and until next time.
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