No details were announced, but Trump said the goal is to ensure that “these very important companies and jobs will be secured long into the future.”
“We will never let the great US oil & gas industry down,” the president said.
‘Survive the crisis’
API CEO Mike Sommers told CNN International on Tuesday that the industry wants to make sure “our companies have access to the liquidity that they need to survive the crisis.” He mentioned the small business lending program created by the $2 trillion stimulus package as well as credit facilities set up by the Federal Reserve in an effort to prevent a full-blown financial crisis.
The oil crash has been driven in large part by the stunning collapse in energy demand caused by the pandemic. Highways are empty. Planes are grounded. Factories are dark.
The supply picture is also a disaster. A price war between Saudi Arabia and Russia flooded the world with cheap barrels — at the worst possible time. And the OPEC+ production cut agreement doesn’t kick in until May.
All of this has caused oil barrels to pile up at an unprecedented clip, and the world is running out of space to store it all. Storage costs have skyrocketed to such an extent that oil prices turned negative.
Here come the oil bankruptcies
Trump downplayed the negative oil price, pointing out that later-dated futures contracts are still safely in positive territory.
Yet other oil benchmarks are signaling deep distress as well. The June contract, which is more heavily traded, plummeted 25% to $15 a barrel. Brent crude, the world benchmark, plunged 20% to $20 a barrel.
These prices are far too low for US shale oil companies to turn a profit. Many will have to shut down production and lay off their workers. Others won’t survive at all.
In a $20 oil environment, 533 US oil exploration and production companies will file for bankruptcy by the end of 2021, according to Rystad Energy. At $10, there would be more than 1,100 bankruptcies, Rystad estimates.
Time to block Saudi oil?
Trump suggested he’s open to the idea.
“We certainly have plenty of oil. So I’ll take a look at that,” the president said during Monday’s briefing.
Energy analysts and industry officials have warned, however, that excluding foreign oil could backfire because US refineries can’t run solely on American shale oil. They require a healthy dose of heavy oil, mostly from overseas, to profitably churn out jet fuel, motor gasoline and diesel.
“One thing that we would be concerned about is any kind of blockade of oil coming into the United States,” Sommers, the API CEO, said Tuesday.