President Donald Trump’s attempts to rescue the oil industry amid record low crude prices is evolving as he floats potential tariffs against Russia and Saudi Arabia while flouting low gas prices.
Trump suggested during an April 3 White House briefing with oil executives that he is considering tariffs on Russia and Saudi Arabia as they increase oil output amid a health crisis. The president backed off the idea Sunday, telling reporters that he might not have to resort to tariffs.
“If I have to do tariffs on oil coming from outside, or if I have to do something to protect thousands and tens of thousands of energy workers and our great companies that produce all these jobs, I’ll do whatever I have to do. Okay?” Trump said during an April 4 press briefing.
He seemed to backtrack the next day. “I would use tariffs if I had to. I don’t think I’m going to have to because Russia doesn’t benefit by having this and Saudi Arabia doesn’t benefit by having it,” the president noted in an April 5 briefing.
The president did not want to remove tariffs as a potential option, according to American Petroleum Institute President Mike Sommers who attended the White House briefing alongside other energy analysts and organizations.
“The president made the case that he would like that arrow in his quiver,” Sommers told The Washington Post Wednesday before suggesting Trump is now aware of API’s opposition to tariffs on this accord.
Oil prices plunged into the $30s as the Saudis pushed for a cut in output to prop up prices, while Russia worked to infuse the market with hundreds of thousands of barrels of oil. Saudi Arabia relented and moved to increase output, kicking off a prolonged sell-off as oil companies struggle with debt concerns.
Other analysts expressed a similar position, noting that nobody knows what to do next.
“The energy industry definitely needs the help right now,” Dan Eberhart, a Republican donor and chief executive of the drilling services company Canary, told WaPo. “Everyone is super eager to help, but doesn’t know what to do.”
Eberhart’s company, like API, opposes slapping tariffs on Saudi Arabia.
Energy companies are facing a rough patch. Americans are isolating themselves to stem the tide of the coronavirus, which is resulting in a decreased amount of flight and car travel, dropping the demand for oil. And Russia and Saudi Arabia’s output is undercutting the market further.
Experts believe U.S. drillers could default on $32 billion of debt throughout 2020 if the virus and Russia continue walloping the industry. The default rate is projected to come in at 17%, according to credit-ratings firm Fitch Ratings.
Fitch forecasted a 7% default rate before the pandemic.
Meanwhile, the president sees a silver lining to bottom-of-the-barrel oil prices: low gas prices.
“Good for the consumer, gasoline prices coming down!” Trump tweeted onMarch 9 as prices continued their sharp declines. He added in a follow-up tweet: “Saudi Arabia and Russia are arguing over the price and flow of oil. That, and the Fake News, is the reason for the market drop!”
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