COVID-19 pandemic causes U.S. oil prices to plummet to historic lows; here's how this will impact you at the pump

SAN JOSE, Calif. (KGO) -- U.S. crude oil prices plunged below $0 per barrel for the first time in history, on Monday.

It's no secret, COVID-19 is keeping people indoors. This means, at the moment, nobody needs oil and there's no place to store everything that's been produced.

"We are in unprecedented territory for a lot of these different metrics. We've never navigated something like this before in the modern era," Patrick De Haan told ABC7 News. "So, it's very tough to keep an idea on what's going on."

De Haan is the Head of Petroleum Analysis at Gas Buddy.

RELATED: Gas prices fall to under $1 in 13 states as demand drops during pandemic

He said it's not unusual to see volatility in prices, especially the day before a contract expires. However, nothing compares to Monday's downturn.

"We saw the first close into negative territory, ever. We saw the biggest one-day percentage drop, ever. We saw our biggest dollar drop in one day, and our lowest close ever," he said.

Fortunately, De Haan added, "The more actively traded June contract is actually trading for about $20 a barrel."

Still, experts explained the bounce back doesn't mean we're in the clear.

"It is necessary to worry," Strategic Management professor at San Jose State University, Robert Wood said. "If there isn't a move to open up in the next three or four weeks, then nobody is going to buy futures for gasoline in June."

Wood said if these low prices continue, oil companies could potentially go bankrupt.

"It's important that oil producers shut down production to a considerable degree," he suggested.

WATCH: Finance expert Suze Orman answers your questions amid COVID-19 pandemic

The move to temporarily idle operations is being made at the Marathon Refinery in Martinez.

The company confirmed COVID-19 and the public health response to it have negatively impacted the global economy and demand for its products.

In a statement, Patty Deutsche said, "Accordingly, MPC will temporarily idle our Martinez, California refinery as of April 27. We plan to utilize our integrated network of assets to continue meeting customer commitments and do not anticipate supply disruptions in the region. We intend to maintain regular employee staffing levels during the temporary idle period, with employees assigned to tasks that are necessary to support our idle status and eventual return to normal operations."

She said, "The duration of the idle period is unknown; however, it is our intent to return to normal operations once demand levels support doing so."

Deutsche confirmed the company has about 740 employees, and the capacity for 161,000 barrels per day.

The refinery produces gasoline, diesel fuel, distillates, petroleum coke, propane, heavy fuel oil and refinery-grade propylene. She confirmed the refinery does not produce jet airplane fuel.

"We could have this happening for quite a number of months because the states are not acting really fast to reopen things," Wood told ABC7 News.

RELATED: CA commissioner orders insurers to refund premiums to drivers amid coronavirus pandemic

At the pump on Monday, many noticed lower prices.

The national average price for a gallon of gas was $1.81, according to AAA.

That number is down 5-cents a gallon from the week before, and 36-cents a gallon from a month ago- as shelter-in-place orders were just starting.

California's average on Monday, according to AAA was $2.81.

Experts admit it's easy to cheer for lower prices, but not for long.

"The longer oil prices remain at these historic lows, the more damage and the more likelihood that we slingshot to higher gas prices in the months or years ahead," De Haan added.

RELATED: Senators demand airlines refund passengers for canceled flights as travelers become more frustrated

He told ABC7 News, "Demand for gasoline has basically vaporized as millions of Americans stay home, and that's translated back into a significant reduction to global oil demand as well."

According to De Haan, this isn't the time for people to rush to fill their tanks.

"California has probably the most downward potential to prices- meaning that in any state in the nation, I think California is the most likely to see the biggest decline in the weeks ahead," he explained.

Simply put, he said it's because retail gas prices haven't kept pace with wholesale gas prices.

"Truly unprecedented times that gasoline supply is now at close to 60-days," De Haan said. "Usually, gasoline supply could amount to 25 or 30 days. We're looking at supplies on hand that could last almost double the normal level."

Wood simplified, "This is not a big problem in the short run, not a big opportunity for the ordinary person to buy gasoline in the short run, but possibly a big problem in the longer run."

ABC7 News visited almost a dozen gas stations across San Jose, while gathering footage for this news story- most were empty.

If you have a question or comment about the coronavirus pandemic, submit yours via the form below or here.
Get the latest news, information and videos about the novel coronavirus pandemic here

RELATED STORIES & VIDEOS:
Copyright © 2020 KGO-TV. All Rights Reserved.