US oil is so cheap right now it's going for less than nothing

A pedestrian stands near a sign displaying the cost of gasoline at a filling station in San Francisco, California July 22, 2015.
A pedestrian stands near a sign displaying the cost of gasoline at a filling station in San Francisco, California July 22, 2015.  
Robert Galbraith

How low can oil prices go?

Cheaper than a bottle of water, perhaps? Cheaper than a stamp?

How about less than nothing.

That’s what US refiner Flint Hills Resources was offering for North Dakota Sour last Friday, Bloomberg reported.  

(North Dakota Sour, in addition to being a solid name for a whiskey cocktail, is a type of oil that has a high sulfur content, which makes it more expensive to turn into gasoline than low-sulfur oils, such as West Texas Intermediate. It therefore sells for a much cheaper price on the market.)

Flint Hills was offering -$0.50 for a barrel of the stuff. In other words, the company was asking North Dakota producers of this particular oil to pay them to take it.

Joel Lewin on Twitter

Now, it’s not like Flint Hills can’t afford to pay something for crude.

The Wichita, Kansas-based refinery is owned by the billionaire Koch brothers, Charles and David, whose names have become synonymous with Forbes rich lists, oil, Dixie cups and bankrolling Republican candidates and politically conservative organizations.

Well, now their name is also synonymous with offering to buy oil for less than nothing.

Bloomberg said the reason for the negative price was “the lack of pipeline capacity for a particular variety of ultra low-quality crude.”

It’s not clear if any producers of North Dakota Sour actually took up the Koch-owned refinery on its less-than-generous offer, but it does say something about the state of the US crude oil market when buyers are audacious enough to ask producers to not only give away their raw material but to pay them to take it, too.

West Texas Intermediate, which is a benchmark for US oils and is one of three key yardsticks used by traders to put a price on international oils, fell below $30 a barrel last week to levels not seen in 12 years as the global glut and darkening economic outlook weighed heavily on demand.

More from GlobalPost: The lowest oil prices since 2003, explained

Something has to give. And maybe it will. 

“Telling producers that they have to pay you to take away their oil certainly gives the producers a whole bunch of incentive to shut in their wells,” Andy Lipow, president of Houston-based Lipow Oil Associates, told Bloomberg.

Flint Hills has since revised the price of North Dakota Sour to a slightly more respectable $1.50 a barrel, which is still a far cry from the $13.50 a barrel this type of oil was going for a year ago.

Now you know how low oil prices can go: below zero.