A couple weeks ago, the price of oil dipped below zero (negative $37.63, to be exact). This was unprecedented. Decreased demand due to COVID-19, the Russia-Saudi Arabia oil war, and near-full storage capacity—together, they briefly forced producers to pay others to take oil off their hands.
At the same time, we started hearing reports of food producers dumping milk, plowing under lettuce, and smashing eggs—even as shoppers complained that their grocery stores couldn’t seem to keep milk and eggs in stock. Idaho farmers dumped potatoes they couldn’t sell...until an ad hoc “potato rescue team” was formed to load potatoes into the back of pickups and get them to food-insecure neighbors. Meanwhile, 61,000 egg-laying chickens were euthanized in Minnesota because of shifting demand.
What do negative oil prices and mountains of discarded potatoes have in common? They both demonstrate how incongruous our markets have become, how divorced they are from reality, and how fragile. It’s a moment, says Strong Towns president Chuck Marohn, reminiscent of The Grapes of Wrath.
In this episode of the Strong Towns podcast, Chuck looks at the oil and food systems in detail. In addition to explaining why it’s possible to have a negative price for oil, Chuck examines the consequences of markets with feedback loops that are too long, why pumping more money into a top-down system won’t help, and how markets can be too efficient. When a feedback loop is too long, the pain and the response are distant, so we keep pumping when we should have received the signal to stop a long time ago. The absurdities of the market have led to sobering questions with real-world consequences: Which businesses should we save? Which businesses should we let fail? And even: Will we run out of food?
We recently launched the Strong Towns Academy. For a limited time only, we are offering a subscription package where you can get all eight of our upcoming courses for just $499. These courses qualify for continuing education credits too. We have a limited number of slots available (and half those slots are already gone), so now is the best time to register: