The Trump administration vowed to stem job losses and rescue the oil industry with stimulus funds and other measures as the U.S. responds to a global glut in crude that’s led to an historic rout in prices.
“We are taking very aggressive but appropriate steps to help the industry,” Energy Secretary Dan Brouillette said during an interview on Bloomberg Television.
The administration was working to ensure that oil and gas companies can access lending programs created by the $2 trillion coronavirus rescue plan, including those meant for medium-sized businesses and the Federal Reserve facility, he said.
The government also is looking to expand oil storage, pressure allies to buy U.S. oil and effectively pay domestic drillers to halt production by buying their undeveloped crude reserves and making them part of the U.S. emergency stockpile.
However, it has yet to find a successful strategy for heading off the devastation among U.S. producers reeling from the twin shocks of the coronavirus crippling demand and a price war between Russia and Saudi Arabia that has flooded the market with oil.
“The market is ruthlessly efficient at weeding out high-cost producers,” Brouillette said. “The demand curve has moved so quickly in a downward fashion, the production is simply not able to keep up with it.”
President Donald Trump earlier helped broker a deal by top oil producers to pull nearly 10 million barrels of crude from the market. Yet demand has collapsed by at least twice that amount and storage tanks will keep filling with crude as long as coronavirus restrictions keep planes grounded and drivers off the roads.
In the meantime, West Texas Intermediate futures plunged below zero Monday and the sector has hemorrhaged an estimated 51,000 drilling and refining jobs in March — 9% of the workforce — according to BW Research Partnership, a research consultancy. The firm said the industry’s job losses could reach as high as 30% or more in the first quarter of 2020.
“A tidal wave of bankruptcies is about to hit the sector,” said Dan Eberhart, the chief executive of oil-field services company Canary Drilling Services, which has furloughed about 200 people and implemented across-the-board salary cuts.
“We will never let the great U.S. Oil & Gas Industry down,” Trump said in a tweet Tuesday morning that came a day after U.S. oil prices went negative for the first time ever. Trump didn’t release many details but said he asked members of his administration to “make funds available” to companies.
The Trump administration has spent weeks looking for ways to help independent oil companies battered by the price rout, including ensuring they can access coronavirus stimulus loans.increasing loans available in coronavirus stimulus funding. Oil firms can access funds from the $2 trillion pandemic rescue aid that Trump signed into law on March 27.
Treasury Secretary Steven Mnuchin could also deem some of those companies as critical to national security, qualifying them for a share of $17 billion authorized by Congress. Or the companies could tap one of the Federal Reserve lending facilities, which are for “distressed sectors” and companies with high credit ratings.
The rescue bill authorized $454 billion to the Treasury Department to use as a backstop for lending through the Fed, which the central bank is leveraging into trillions of dollars.
Trump is also being urged to pressure China to buy U.S. oil — and live up to its trade pact pledge to purchase more than $52 billion worth of American energy.
“China has only purchased a de minimis amount of U.S. crude in the first months of 2020, while it has increased purchases of crude oil from Saudi Arabia and Russia,” the American Exploration and Production Council said in a letter to U.S. Trade Representative Robert Lighthizer. “Rather than increasing imports from countries like Russia and Saudi Arabia, the Chinese government must take the necessary steps to remain in good standing with the U.S. as a trusted trade partner.”
Environmental activists, meanwhile, blasted Trump’s pledge to outright rescue the oil industry with taxpayer funds. “Putting people and public health first means not a cent of taxpayer money should go to the corporations that created and profited from the climate crisis,” said Jack Shapiro, a senior climate campaigner with Greenpeace USA.
Trump has rebuffed other proposals for industry-targeted aid, including a broad effort to stop charging energy companies royalties for oil and gas produced on federal lands and waters. The Interior Department has said oil companies can seek royalty relief on a case-by-case basis, instead of under a broad Trump administration waiver.
The collapse is reverberating across the oil industry. On Monday, WTI Midland in Texas — a flagship marker for the U.S. shale industry — was at -$13.13 a barrel, while crude in Alaska was at -$46.63. Oil’s meltdown continued Tuesday as the price for the June contract plummeted plummeted 43% to close below $12 a barrel in New York.
–With assistance from Saleha Mohsin and Jordan Fabian.
