On The Hill

 

On Thursday (Apr. 2), President Trump signaled a solution might be in sight for the global price war, tweeting, “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!”^[1] This could be a much needed change in the ongoing oil price war between Saudi Arabia and Russia that has had a drastic impact on U.S. oil and gas producers.

 

Brent crude prices surged as much as 45 percent after the tweet, and U.S. prices ended up near $25 a barrel by mid-afternoon on Thursday. On Friday (Apr. 3), oil prices rose sharply, rising as much as 10 percent, extending Thursday’s gains.

 

The Trump administration is putting pressure on OPEC, Saudi Arabia, and Russia to declare a ceasefire and reverse the export increases that have drowned the global market in crude, even as the coronavirus pandemic has weakened demand. Some sources have said they thought the White House may offer concessions on Venezuelan policy to bring Russia to the table.

 

Three senior House Republicans which includes Minority Leader Kevin McCarthy (R-CA), Mac Thornberry (R-TX), and Greg Walden (R-OR) urged Secretary of State Mike Pompeo in a letter to exert “appropriate diplomatic pressure to prevent the actions of these foreign nations from inflicting unnecessary damage on the economies of the world.”^[2]

 

OPEC and allies are working on a deal around a production cut equivalent to around 10 percent of global supply. A meeting between OPEC and allies has been scheduled for Monday, April 6. The teleconference will discuss world oil supplies, and will include Russia and other countries, “if they wish.”

 

The conflict between the two major producers has accelerated the collapse of oil prices, which fell around 55 percent in March. Additionally, plunging prices threatens to destabilize countries where local economies depend on oil production.^[3]

 

 

 

On Tuesday (Mar. 31), the Trump administration completed its rollback of Obama-era clean car standards. This is the second part of the rollback, which is formally known as the Safer Affordable Fuel-Efficient (SAFE) Vehicles rule.

 

The second part released this week would require automakers to increase the fuel economy of passenger cars by 1.5 percent each year. The standards set by former President Obama mandated a 5 percent annual increase in fuel economy.

 

But, the announcement is less dramatic than the Trump administration’s original plan. This plan would have frozen the standards at 2020 levels through model year 2026. The new rule is a joint endeavor between EPA and the National Highway Traffic Safety Administration.

 

Environmental Protection Agency (EPA) Administrator Andrew Wheeler told reporters, “Now, more than ever, this country needs a sensible national program that strikes the right regulatory balance for the environment, the auto industry, the economy, safety, and American families. The final SAFE rule does all of those things.”

 

Senate Environment and Public Works Committee Ranking Member Tom Carper (D-DE) criticized the administration for pushing through the rollback during the coronavirus crisis. “The path of costly, prolonged litigation was entirely avoidable, but in the midst of an economic crisis brought on by the COVID-19 pandemic, that is the path this administration has chosen,” Carper said in a statement.^[4]

 

A statement from the White House said the new rule “provided a reality check” to the Green New Deal environmental activists. Last week, Republicans accused their Democratic colleagues of trying to put elements of the Green New Deal into the third coronavirus relief package.

 

The new rule will likely face legal challenges expected to be resolved by the Supreme Court.

 

 

 

The Department of Energy (DOE) officially announced Thursday (Apr. 2), to lease space for 30 million barrels of oil in the Strategic Petroleum Reserve. The solicitation offers to store 22.8 million barrels of sweet crude oil, and 7.2 million barrels of sour crude oil.

 

Secretary of Energy Dan Brouillette said, “Filling the SPR with crude oil, produced by American companies that are facing catastrophic losses and increased financial hardship, is a logical action for the federal government to take as we work to overcome the economic disruptions caused by COVID-19 and intentional, global oil market disruptions”^[5] 

 

The SPR has become a “go-to” market-based policy response to the oil glut. Yesterday’s solicitation calls for proposals to fill the SPR with crude oil until the end of June.

 

 

 

This week, Congress began to sketch the next coronavirus response package. On Friday (Apr. 3) House Speaker Nancy Pelosi (D-CA) called for a “more focused” Phase 4 relief package that addresses immediate needs related to the pandemic, including expanded unemployment insurance and more direct payments to Americans. This is a different tone from earlier this week, when her and other top Democrats were pushing a larger, broader, “green” infrastructure package for the fourth deal. This means the infrastructure push may have to wait until after the next relief package.

 

Pelosi is now on track to make a deal with Republicans in the coming weeks. Numerous GOP officials criticized the previous efforts to broaden the legislation. “While I’m very much in favor of doing some things we need to do to meet the needs – clean water, more broadband, the rest of that – may have to be for a bill beyond that right now,” Pelosi said on CNBC.

 

The idea of a multi-million dollar infrastructure package was supported by both Democrats and the White House; but Senate Republicans almost uniformly opposed a sweeping infrastructure package at this point.

 

Senator Cory Gardner (R-CO) said, “We are already working on ideas for phase four and we’re collecting those ideas from constituents in Colorado, we’ve got some adjustments to the CARES Act that I think would be appropriate for phase four” and “I’d like to see an infrastructure bill more forward. Maybe that’s phase four, maybe that’s ‘phase 5.’ But there’s going to be additional action required.”

 

The pivot came after new unemployment numbers were released. The numbers are expected to continue to rise, contributing to the need for a more focused package. The timeline for legislative action is uncertain.^[6]

 

 

 

On Friday (Apr. 3), President Trump met with top oil industry executives to discuss the oil crisis, layoffs, and spending cuts that have disrupted the industry; along with potential solutions for the crisis. Executives from Chevron, Exxon, and other large and medium-sized companies industry trade groups, as well as Republican lawmakers, met with President Trump to discuss a response to the crisis plaguing the industry. At the meeting, President Trump said that the U.S. will “get our energy business back” and that he was with them 1,000 percent.

 

No new action was immediately announced at Friday’s meeting. 

 

Additionally, House Republican Whip Steve Scalise (R-LA) and other Republican lawmakers led a letter to President Trump signed by 41 members in support of policy strategies that would provide U.S. energy producers and workers relief. These include: royalty relief, utilizing the Strategic Petroleum Reserve, maintaining liquidity and access to capital, and regulatory relief efforts.

 

To view the letter in its entirety, click here.

 

 

 

^[1] Koss, Geof. “Trump sees Saudi-Russia production cuts coming.” Greenwire, 2 Apr. 2020. https://www.eenews.net/greenwire/stories/1062768949

 

^[2] Lefebvre, Ben. “Trump calls on Russia and Saudi Arabia to cut oil production.” Politico Pro, 2 Apr. 2020. https://subscriber.politicopro.com/article/2020/04/02/trump-calls-on-russia-and-saudi-arabia-to-cut-oil-production-161368

 

^[3] “Live Updates: Markets.” The New York Times, 3 Apr. 2020. https://www.nytimes.com/2020/04/03/business/stock-market-today-coronavirus.html

 

^[4] Joselow, Maxine. “Trump admin finalizes clean cars rollback.” Greenwire, 31 Mar. 2020. https://www.eenews.net/greenwire/stories/1062750601/search?keyword=car+rule

 

^[5] Adragna, Anthony. “DOE offers oil storage in Strategic Petroleum Reserve.” Politico Pro, 2 Apr. 20. https://subscriber.politicopro.com/article/2020/04/doe-offers-oil-storage-in-strategic-petroleum-reserve-3978839

 

^[6] Caygle, Heather. “Consensus starts to grow on ‘phase 4’ coronavirus relief.” Politico Pro, 3 Apr. 2020. https://subscriber.politicopro.com/article/2020/04/pelosi-pivots-on-phase-4-coronavirus-relief-push-1910811