Amid Coronavirus, Steps President Trump Must Take to Protect American Energy

Amid Coronavirus, Steps President Trump Must Take to Protect American Energy
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U.S. oil is currently unprofitable for many energy E&P (exploration and production) companies, and President Trump needs to act.

An article calling for Executive action to support the oil industry will be ridiculed by the ill-informed, and if we had time to explain commodities markets and macroeconomics, we would do so. But time is not on our side, so we will be brief.

Oil exploration costs a tremendous amount of capital. Land must be leased, equipment purchased and moved to locations as remote as the tundra of Alaska and the deserts of New Mexico. Highly skilled energy workers command commensurate salaries. Multiple legal, environmental, and safety issues all cost money, and this list barely scratches the surface of the almost innumerable expenses oil companies risk before one drop of oil is produced.

In order to recover the billions of dollars in sunk costs, oil must be worth a certain amount per barrel. And $30 is not not enough to cover the costs. Currently, without price hedging, most oil and gas producer in America are losing money and headed for bankruptcy. This is bad for the entire economy. Liquidity will be exhausted, loans will default, and then worst of all: layoffs. Potentially millions of layoffs.

PricewaterhouseCoopers has estimated that the oil and gas industry supports over 10 million jobs, which is over 5% of America’s total employment. If a significant percentage of those are laid off, and they will be unless President Trump acts, communities will dissolve and tax revenues will collapse. Safety nets like unemployment insurance will be exhausted. Home mortgages will default. Families stop shopping, consuming, streaming, purchasing. The ripple effects will be devastating from small rural towns to major cities and everyone in between.

The current crash in the oil market is not caused exclusively by the Wuhan Coronavirus, though a decrease in demand from stagnating economic activity because of the outbreak does exacerbate the issue. No, the oil market crash is a decades old fight between oil-dominant nations: Russia and Saudi Arabia.

America is the world’s largest oil producer, but this industry is only 8% of our economy. This is good. It’s a sign that America has a healthy and diverse economy. This is not the case for the Russians and the Saudis. The petroleum sector accounts for 87% of the Saudi economy. Russia is more diversified, but at 25%, the oil and gas industry is still disproportionately bolstering their economy. These nations need to dominate the global oil industry, and to do that, they must eliminate the competition.

America is their biggest competition. President Trump’s agenda of “Energy Dominance” has unleashed our domestic energy capability and increased our national security. When he took office in January of 2017, America produced roughly 7 million barrels of oil per day. Today, we produce close to 13 million. This is great news for America, American jobs, and the American economy.

It is terrible news for Russia and Saudi Arabia. So, during the international panic caused by the Wuhan Coronavirus they are taking action: increase production. By flooding the markets with too much supply, they are intentionally driving the price of oil down with the hopes of bankrupting American producers.

When American energy companies go bust and shut down, Russia and Saudi Arabia will once again dominate the market, setting production, and by extension, prices, as they so desire. This is how the oil markets ran for decades: America and her allies beholden to OPEC’s good will. This is the “return to normal” they seek.

America cannot let this happen, and President Trump can do a few things to protect America’s energy dominance and the nation’s economy.

First: Place significant tariffs on all oil imports from outside North America. America consumes more oil than it produces. Last year we needed 500,000 barrels per day. More than 50% of our foreign oil comes from our neighbors Canada (43%) and Mexico (9%). The OPEC nations make-up 18% of our oil imports. Russia accounts for another 6%. This must end. America has ample domestic resources and technology to fully supply our country’s energy needs.

The U.S. should only trade with countries that engage in fair trade and show mutual respect. Russia and the Saudi’s are not demonstrating respect; they are engaged in a deliberate price war to attack American jobs, families and national security

Second: Provide low cost debt facilities for the oil and gas industry to backstop the private credit markets. Oil and gas companies have bonds and credit revolvers that need to be refined over the next 12-24 months and the private markets are frozen and out of balance due to the stock market recent whipsaw. Providing an accessible debt resource will help stabilize the industry and markets.          

Third: In exchange for these supporting policies; the U.S. oil and gas industry should somehow be required to “help themselves” by significantly paying down debt and strengthening their balance sheet; eliminate natural gas flaring; and dramatically increase extraction efficiency so they can more effectively compete for world market share and create greater value for all stakeholders.      

We’re just spit-balling some ideas. However, national oil monopolies like Russia and Saudi Arabia cannot be allowed to maliciously disrupt world markets - especially during a time of worldwide pandemic - and intentionally try to destroy the oil and gas producers in America.

American jobs and families are one the line. America’s oil and gas industry and national security are on the line.  Russia and Saudi Arabia have launched an economic, nuclear attack on America.

Immediately imposing tariffs on oil imports from outside North America would support American security, jobs and producers. This would also provide a strong measure of foreign policy discipline to Russia and Saudi with – arguable the first - material counter offensive against OPEC/ OPEC+ since its creation in 1960 as a weapon against the west and an instrument to manipulate markets.

Dan Genovese is a Director at the energy consulting firm EnerCom, Inc. with experience in corporate strategy, investor relations, ESG, government relations and policy. Mr. Genovese has worked in capital markets and has experience in upstream production and downstream energy demand. Contact:

Daniel Turner is the founder and executive director of Power The Future, a national nonprofit organization that advocates for American energy jobs. Contact him at and follow him on Twitter @DanielTurnerPTF

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