As Price of Oil Drops, Trump Orders Plan to Help U.S. Energy Companies: Energy Secretary Says Funds from Fed’s Main Street Loan Program Might Be Needed to Help Oil Companies

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April 22, 2020

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by Will Englund (Washington Post) President Trump said Tuesday he has ordered his administration to come up with a plan to provide federal assistance to the oil and gas industry in the United States, which has been staggered by the consequences of the coronavirus pandemic.

A huge drop in demand for crude oil because of the global economic slowdown has led to a glut that is close to filling all available storage capacity and that has driven prices below what most oil-producing American companies can sustain.

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Until now, the American oil industry has been divided on whether to seek federal help, with the larger companies and the American Petroleum Institute arguing against it.

But Energy Secretary Dan Brouillette said Tuesday on Bloomberg TV that the United States would be taking “very aggressive” steps to assist the oil industry and might use funds from the Fed’s Main Street lending program.

That program is designed to support “small and midsized businesses that were in good financial standing” before the coronavirus crisis, according to a Fed statement. It is to provide four-year loans to companies with fewer than 10,000 employees or with revenue of less than $2.5 billion.

Over the past four years, the oil sector has built up an extremely large amount of debt — more than $200 billion among production and pipeline companies — and a significant number of firms were thought to be in precarious shape before the pandemic hit.

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Thousands in the industry have been laid off, but not to the extent that job losses have hit other sectors, especially hotels and food service. In North Dakota, the second week of April saw 1,250 unemployment claims in oil and gas and related fields, in contrast to 10,504 claims in all sectors of the economy. In Louisiana, 1,148 people who had been working in oil and gas filed unemployment claims; 79,653 claims were filed from all businesses.

In Texas, the numbers have been similar.

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Tuesday morning, Trump tweeted: “We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!”

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A Greenpeace climate campaigner, Jack Shapiro, argued Tuesday that Trump has been hoping since March to help the oil industry, even as Republicans tried to obscure the potential benefits companies could obtain through the Cares Act.

“Trump’s tweet today lays out in the open what his administration has been hinting at for weeks: He is ready to use federal funds — including taxpayer money — to bail out fossil fuel companies hit by a combination of market shocks, their own risky business decisions and low demand due to covid-19,” Shapiro said.

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America’s privately owned oil companies, which face a break-even price averaging around $48 to $50 a barrel, have not until now had the luxury of a major national budget to support them. Trump’s new plan may change that. READ MORE

TEXAS STEERS CLEAR OF MANDATED PRODUCTION CUTS, FOR NOW: (Washington Examiner)

Texas regulators decline to force oil cuts after historic oil price crash (Al Arabiya English)

Texas' oil and gas regulators aren't ready to cut production yet. They're not even sure how it would work if they did. (Texas Tribune)

Trump Administration Weighs Aid for Oil Companies -- Possible conditions include producers offering ownership stakes or oil reserves to the government (Wall Street Journal)

Texas Regulators Decline to Force Oil Cuts, but Producers Are Cutting Anyway—Update (Morning Star)

‘I’m Just Living a Nightmare’: Oil Industry Braces for Devastation (New York Times)

Analyst: Ethanol Is ‘Glaring Omission’ In Relief Package (Ag Professional)

VIRUS SENDS ETHANOL INTO ‘WORST CRISIS’ IN INDUSTRY’S HISTORY: (Washington Examiner)

Renewables Top Coal, Oil Markets “Officially Broken” According to Industry Analysts (Our Daily Planet)

Even with stress on ethanol, oil state leaders want more exemptions (Iowa Agribusiness Radion Network; includes AUDIO)

Trump pledges financial aid to oil industry (Politico)

White House: 'All options' on table to address oil glut (E&E News)

Saudi America, The Truth About Fracking and How It's Changing the World (Bethany McLean) WATCH VIDEO

MNUCHIN LOOKING TO LEND TO OIL: (Politico's Morning Energy)

U.S. OIL INDUSTRY LOOKS TO CHINA: (Politico's Morning Energy)

Mnuchin weighs lending program for struggling oil companies (Bloomberg)

US refiners in harm’s way if Trump blocks Saudi oil (Washington Examiner)

Excerpt from Iowa Agribusiness Radion Network: he governors of Texas, Wyoming, Oklahoma, Utah, and Louisiana are asking for further exemptions from the blending rules under the Renewable Fuels Standard (RFS). They are citing economic hardship from the COVID-19 outbreak. Geoff Cooper is the President and CEO of the Renewable Fuels Association (RFA). He says that everybody is hurting. COVID-19 has compounded strain on the biofuels industry which was caused by the wholesale granting of illegal waivers.

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Cooper says the ethanol and RFS requirements are fluid with oil and gas consumption. Just like gas prices.

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Cooper says to blame the RFS is “ludicrous.” He says ethanol isn’t responsible for their profit losses, it is the pandemic.

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Also, the dumping of oil by Russia and Saudi Arabia into the world marketplace has caused furthering weakening in the market. READ MORE

Excerpt from New York Times: Oil giants like Exxon Mobil have slashed their 2020 exploration and production budgets by nearly a third, and that was before the total oil price collapse at the start of this week.

Many smaller oil companies are expected to seek bankruptcy protection in the coming months after having spent years borrowing billions of dollars to extract and move crude. Production companies have $86 billion in debt coming due between 2020 and 2024, and pipeline companies have an additional $123 billion they have to repay or refinance over the same period, according to Moody’s Investors Service.

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President Trump has said that he stands ready to help U.S. oil and gas businesses, a position he reiterated on Tuesday. But the policies he and other administration officials have proposed — imposing tariffs on foreign oil or filling the Strategic Petroleum Reserve — would do so little that their impact would amount to a rounding error.

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Simply put, the global oil industry is producing vastly more oil than the world needs — about 30 million barrels a day too much. Even if the federal government started buying oil for the reserve immediately, it could absorb only half a million barrels a day, or less than 2 percent of the excess world production.

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“It’s a sad time for our business, that’s for damn sure,” said Jim Wilkes, president of Texland. “The future is very cloudy right now because the pricing is below our production costs.”

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Mr. Wilkes said he was not planning to fire anyone, at least not now, because he took a Small Business Administration loan to pay his workers for two months, at which point the loan will be forgiven.

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“If for some reason Latshaw Drilling doesn’t make it through this,” Mr. Latshaw (Trent Latshaw, president of Latshaw Drilling) said, “the good Lord has something else planned for me.” READ MORE

Excerpt from Politico's Morning Energy: MNUCHIN LOOKING TO LEND TO OIL: Treasury Secretary Steven Mnuchin is seeking a mechanism to lend money to oil companies struggling with the collapse in demand. "One of the components we're looking at is providing a lending facility for the industry," Mnuchin told Bloomberg News Thursday. "We're looking at a lot of different options, and we have not made any conclusions."

Those comments came after Trump tweeted earlier this week that "We will never let the great U.S. Oil & Gas Industry down," and ordered Mnuchin and Brouillette to come with a plan to aid the sector. READ MORE