Oil Market Collapse Impacting CountryMark Co-op
Last week world crude oil prices collapsed. This, along with the COVID-19 pandemic, is having a negative impact on Indiana’s farmer-owned, fuel co-op.
It is the perfect storm, collapsing oil prices and falling demand for gasoline. Matt Smorch, CEO of CountryMark said, as a result, they are beginning to reduce production.
“We do produce oil from the Illinois basin; and right now, with the low crude oil price, that production is not economical. So, we are in the processing of shutting down that production.”
But the slowdown in the demand for gasoline is causing another problem at the CountryMark refinery in Mt. Vernon.
“We produce mainly diesel fuel for our farmer customers,” said Smorch. “We are a very diesel-centered company. The problem is you can’t produce diesel without also producing gasoline and right now we can’t sell the gasoline.”
With the limits on travel and with many Hoosiers out of work, people are not driving and the demand for gas is down sharply.
If there is a silver lining to this dark cloud, it is that both gasoline and diesel prices at the retail level are at very low levels.
“We do have a program where our members and customers can lock in the cost of their fuel into the future,” said Smorch. Fuel may be only farm input cost that is going down this year.
As for the future, Smorch says recovery is going to take a while.
“I think, once we see things begin to open back up and people start to go back to work in the next few weeks, the demand for gas will pick up. Longer term, however, I think it will be well into next year before we see things get back to normal.”
He added that CountryMark will not likely have a good financial year in 2020 but is well positioned to recover in the future.