Trump Pledges Funds for Oil Industry to Avert Deeper Job Losses
President Donald Trump said his administration is working on a plan to make money available to the oil industry to prevent the loss of jobs after prices plunged below zero.
“We will never let the great U.S. Oil & Gas Industry down,” Trump said in a tweet on Tuesday. “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!”
The oil and gas industry shed nearly 51,000 drilling and refining jobs in March, a 9% reduction that is likely to get worse as prices plunge.
March’s job losses rise by 15,000 when ancillary jobs such as construction, manufacturing of drilling equipment and shipping are included, according to BW Research Partnership, a research consultancy, which analyzed Department of Labor data combined with the firm’s own survey data of about 30,000 energy companies.
West Texas Intermediate plunged below zero on Monday for the first time in history with the contract for May nearing expiration, leaving traders in a panic as they tried to avoid taking delivery of physical barrels. On Tuesday the losses spread to the next month -- highlighting the massive glut in the market causing the rout rather than any technical quirk.
Energy stocks pared their decline following Trump’s tweet. The Standard & Poor’s 500 Energy Index was down 1.9% at 9:54 a.m. in New York after tumbling as much as 4.4%.
The Trump administration has spent weeks looking for ways to help independent oil companies battered by the price rout.
The Energy Department already has drafted a plan to effectively compensate those companies for halting oil production by buying their untapped crude reserves and making them part of the U.S. government’s emergency stockpile. Under the plan, the government would essentially buy the oil locked underground but ask producers to hold off on extracting or delivering it.
Federal law authorizes the Energy Department to set aside as much as 1 billion barrels of oil for emergencies, but the agency has only used about two thirds of that capacity with crude stashed in a complex of salt caverns along the Gulf Coast. That creates the opening for the new keep-it-in-the-ground approach to oil reserves.
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.
Tuesday’s collapse of later contracts underscored the severity of the crisis.
Storage tanks, pipelines and tankers are rapidly being overwhelmed by a vast oversupply caused by slumping fuel demand as countries are locked down to fight the coronavirus. Traders everywhere are having to reassess their risk after Monday’s unprecedented collapse, leading to violent intraday swings. WTI’s June contract was halted three times early in New York to manage the volatility, CME Group Inc. said.
June West Texas Intermediate futures edged up about $1 after the tweet to $15.57 a barrel, but was still down more than $5 on the day.
The thinly traded May contract rose above zero to $1.40 a barrel. Brent crude slumped 20% to $20.48, having earlier dropped to as low as $18.10.
The collapse is reverberating across the oil industry, with prices trading below zero across America. 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.
— With assistance by Ari Natter, and Saleha Mohsin
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