Republicans lukewarm on oil industry rescue

Source: By Jeremy Dillon and Nick Sobczyk, E&E News reporters • Posted: Tuesday, March 10, 2020

As oil markets wake up from yesterday’s historic drop in prices, a recurring theme throughout Capitol Hill called into question a need for any type of government financial assistance to aid the oil and natural gas industry.

And according to the oil lobby, it isn’t looking for any either. “We believe we should not be reacting to one day of a market downturn,” Mike Sommers, president and CEO of the American Petroleum Institute, said during a call with reporters last night.

Despite those public declarations, the White House still appears dead set on pulling together some type of financial assistance to bolster markets throughout the oil and the new coronavirus turbulence — and that may include some ways to help the energy sector.

President Trump plans to meet with Wall Street executives tomorrow at the White House to discuss ways to form such a package. Energy may be on the agenda, E&E News has confirmed.

During a White House briefing for the media last night, Trump did not take questions but hinted at a “major” economic announcement coming today.

On Capitol Hill, there does not appear to be too much of an appetite on the energy front for such a stimulus.

Republicans appeared skeptical yesterday of any sort of economic package to prop up energy companies reeling from low prices.

“I’m not a big bailout guy,” Senate Appropriations Chairman Richard Shelby (R-Ala.) said when asked about potential congressional action to prop up oil and gas companies.

But he added, “Let’s see where we are in a month from now or three weeks from now.”

‘Deep hole to dig out of’

Sen. Kevin Cramer (R-N.D.), whose state is the nation’s second-leading producer of crude oil, similarly tamped down talk of tax cuts or spending as economic stimulus, but he did not rule out help for farmers.

“We’re a commodity-dependent state,” he said. “We grow commodities that people eat and energy, and so we’ve been through these cycles before.”

The United States could pressure Saudi Arabia to cut production, Cramer said, but it may not be effective given that “they have other dance partners in this.”

“On the oil front, my concern is that the supply glut gets so great at a time of shrinking demand because of the coronavirus and other things that this could be a fairly deep hole to dig out of,” Cramer said. “I don’t know what the end of it is. I don’t know when we get to $40 again.”

For oil state lawmakers, a price reduction could have devastating impacts on the state economy. None more so than in Alaska, where much of the state’s budget relies on returns from oil and gas production, said Senate Energy and Natural Resources Chairwoman Lisa Murkowski.

The Alaska Republican did not advocate for any particular type of assistance but did note other factors are hitting the state in a variety of ways.

“One of the things that is not helpful is the message that we seem to be getting out of some of these financial institutions saying that they’re not going to be there to help as investors or lenders in projects in the Arctic,” Murkowski said, referencing recent announcements that some banks would not finance projects in the Arctic National Wildlife Refuge.

Petroleum reserve sale

One area that Congress could interject itself is potentially delaying a mandated crude oil sale from the Department of Energy’s Strategic Petroleum Reserve.

Bids are due to DOE today on the sale of 12 million barrels from the SPR, as required by law under the Bipartisan Budget Act of 2015.

The Senate Energy and Natural Resources Committee is looking into whether it could help intervene.

Shelby was unaware of the impending SPR sale when asked yesterday, but he said it would be “pretty stupid right now.”

“The timing would be terrible,” Shelby told reporters. “We’d call that a fire sale.”

API had a similar reaction but did not say whether it wants Congress to intervene.

“It’s obviously a less than an ideal time to put that much oil in the market,” but they are handcuffed by the law, Sommers said during the call with reporters.

Cramer, who favors getting rid of the SPR, said Congress doesn’t need to intervene in the sale.

“I personally don’t think it matters much in the big scheme,” Cramer said. “It’s a supply that’s either available now or it’s going to be available later, and to me it’s already baked into the supply-demand balance.”

Reporters Geof Koss and Hannah Northey contributed.