The leader of the largest U.S. oil and gas trade group said the industry is not interested in receiving aid from the Trump administration to help overcome a historic drop in oil prices on Monday.
“We are not in discussions with anyone in the administration at this time on any type of program for the industry,” said Mike Sommers, the CEO of the American Petroleum Institute, in response to a question from the Washington Examiner on a press call. “We believe we shouldn’t be reacting to one day of a market downturn.”
Sommers added he has spoken to a number of API members and that the consensus is, “They are not asking for anything from the government.”
The Trump administration is reportedly considering giving assistance to industries affected by the economic fallout from the coronavirus.
There is “a lot of concern” among oil and gas companies about the prospect of $30 per barrel oil, a level at which Sommers said producers would not be profitable.
But, he said, “We are focused on long-term fundamentals” that show continued strong demand for oil and gas in future decades.
“American producers are very resilient,” Sommers said. “They have seen these kind of cycles before. You will continue to see a lot of resilience in the American oil markets.”
Oil prices tumbled Sunday night by over 30% to below $30 per barrel as Saudi Arabia flooded the market with low-priced oil to gain market share from Russia after a three-year production-cut agreement organized by the two powers fell apart on Friday.
Russia decided not to join Saudi Arabia’s call for greater production cuts in response to the coronavirus amid frustration over years of losing market share to U.S. shale producers.
Sommers took aim at Russia, accusing it of trying to “put out of business” U.S. shale producers, especially in the prolific Permian Basin in West Texas.
“What they are really trying to do is put the American energy revolution to rest,” Sommers said.
Brent crude, the global benchmark, recovered slightly to $34.36 later on Monday, but the initial decline was the largest since at least the 1991 Gulf War, experts said. West Texas Intermediate, the U.S. marker, was lower, at $31.13.
But experts said the current price cycle is unique in combining weak demand with a global price war.
The International Energy Agency projected Monday that global oil demand will drop this year for the first time since 2009 because of a deep reduction in consumption in China, along with global travel and trade disruptions, resulting from the ongoing coronavirus crisis.
“With a combination of a massive supply overhang and a significant demand shock at the same time, the situation we are witnessing today seems to have no equal in oil market history,” IEA Executive Director Fatih Birol tweeted on Monday.
Sarah Ladislaw, director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies, said in a report Monday that bigger oil producers have hedged against low prices and can “weather the storm awhile,” but smaller producers don’t have the same access to cheap capital anymore and could be “driven out of business” by lower prices.
“The U.S. oil industry will be fine, but individual companies and even communities will be hard hit and are not adequately prepared to deal with an oil bust, especially alongside a burgeoning public health crisis,” Ladislaw said.
