Oil industry executives say they will meet with President Donald Trump on Friday to discuss markets troubled by weak demand, tumbling prices and a supply glut.
Word of the meeting comes as oil-state lawmakers fear the industry is running out of space to store its product, given that millions of Americans are staying at home to mitigate the coronavirus pandemic and as a production dispute between Russia and Saudi Arabia floods the market.
An official from the American Petroleum Institute said the trade group’s president, Mike Sommers, will attend the meeting and emphasized the industry isn’t seeking any “government subsidies or industry-specific” interventions.
“Natural gas and oil will be critical to our nation’s economic recovery, and the industry’s message to the administration is sharing actions it is taking during this challenging time and highlighting that history has proven that markets work,” the official said.
There’s an excess of 15 million barrels a day of crude oil right now, according to Richard Joswick, managing director of oil analytics at S&P Global Platts.
The problem isn’t just among crude oil producers. Refineries that produce petroleum products such as gasoline and diesel are also running out of storage for the excess products they had anticipated selling, as travel advisories and shelter-in-place orders keep people away from the gas pump.
The EPA has said it will give companies nearly three extra weeks to sell off their winter gasoline before switching to less polluting summer blends on May 20, rather than May 1.
“All parts of the industry will share the pain of lower demand, and there’s little the U.S. can do legislatively to help the problem,” Joswick said.
With few legislative cards to play to move oil markets, lawmakers such as Sens. Lisa Murkowski, R-Alaska, Kevin Cramer, R-N.D., and John Kennedy, R-La., are demanding that the administration intervene.
Lawmakers had pushed for the just passed coronavirus stimulus package to include money for the Department of Energy to buy oil for the Strategic Petroleum Reserve. Ultimately, that provision wasn’t included because of Democratic opposition.
The Energy Department on March 19 sent out solicitations for crude oil from small and midsize producers to fill the Strategic Petroleum Reserve.
DOE ready to buy
Secretary of Energy Dan Brouillette said the government planned to initially buy 30 million barrels and then increase its purchase to 77 million barrels, which would fill up the reserve. Still, the agency would need Congress to approve the funding for the purchase.
A spokesperson for Murkowski, who is chairwoman of the Senate Energy and Natural Resources Committee, said the lawmaker would like such a provision to be included in the next stimulus bill to help “soak up” the excess oil.
“Congress will likely have another opportunity to help via SPR purchases in upcoming legislation — which Senator Murkowski would support,” spokeswoman Grace Jang said Wednesday in an email.
“We also believe DOE has administrative authority to utilize excess capacity in the SPR, which could help with domestic storage.”
Storage is fast running out, Joswick said. “We expect that the discretionary storage will fill up quickly…in the next month or so.”
He said the government’s proposal to buy oil and store it in the strategic reserve would only put a small dent in the problem.
The SPR right now has room for 90 million barrels of oil. There are also limits on how much oil can be physically delivered into the SPR daily, a problem that cannot be quickly solved.
“I really don’t see how Congress can do very much to help,” Joswick said.
Lawmakers are in the meantime also pushing the administration to coax Russia and Saudi Arabia to come to an agreement to cut their production and stabilize the markets.
In a Tuesday news release, Cramer, whose state of North Dakota is the second-largest oil producer, said he had urged President Donald Trump, to use “tough diplomacy” to intervene in the Saudi-Russia impasse.
Cramer last week introduced legislation with Sen. Dan Sullivan, R-Alaska, that would direct the government to remove U.S. armed forces from Saudi Arabia unless it reaches an agreement with the Russians.
“We cannot tolerate having 2,500 troops and missile defense batteries protecting Saudi Arabia’s oil assets while they declare war on our oil assets in North Dakota and across the United States,” Cramer said.
The senators, who sit on the Armed Services Committee, argue that while the U.S. has been an ally to Saudi Arabia, that country has rejected its leadership role in stabilizing global markets as the world battles the health crisis.
Separately, Murkowski has asked Secretary of State Mike Pompeo to take a “more aggressive stance” with Saudi Arabia and Russia, including the possibility of using the “enormously powerful tools at our disposal” such as aid and assistance or tariffs, trade restrictions and sanctions.
She and other oil state lawmakers have also asked the Commerce Department to investigate oil dumping by those countries.
The DOE said on Tuesday that Brouillette had held a “productive discussion on the current volatility in global oil markets,” with Russian Minister of Energy Alexander Novak, but did not elaborate. According to the agency, Trump had also spoken with Russian President Vladimir Putin on the matter.