American shale producers have launched an aggressive lobby campaign for new sanctions against Saudi Arabia and Russia, urging the White House to force oil-producing countries to cut production to support crude prices.
The industry appealed to President Donald Trump’s recently departed energy secretary Rick Perry for help, including advocating a blockage of Saudi crude shipments to the largest refinery in North America.
Shale producers face an existential threat since the collapse of demand in a context of global blockage of coronaviruses and a war of Saudi-Russian market shares which brought crude oil prices down to $ 20 a barrel . Most shale producers are unprofitable at prices below $ 50 a barrel, and bonds from some shale companies have sold strongly, with investors anticipating widespread bankruptcies in the sector.
Trump came to the aid of shale producers on Thursday, citing a possible production reduction agreement between Moscow and Riyadh, which has boosted crude prices by more than 20%. But the Kremlin has denied any pending deals.
The shale push comes despite resistance from the most powerful lobbying organization in the petroleum industry, the American Petroleum Institute, which represents the largest energy groups and opposes any control of supply.
Among the shale industry’s proposals are to prevent Saudi crude from reaching the kingdom’s large Motiva refinery in Port Arthur, Texas; foreign oil tariffs; or suspend the Jones Act, which helps make crude oil shipped by domestic suppliers more expensive than oil delivered by foreign tankers.
“The most successful idea is to target Motiva,” the largest refinery in North America, said an executive from a shale producer.
Shale producers are also urging the White House to consider suspending U.S. military aid to Saudi Arabia and imposing new sanctions on Russian energy – or to lift existing ones if the Kremlin cooperates. The United States recently imposed sanctions on a business unit of Rosneft, the Russian state-owned energy company.
Trump is scheduled to meet with oil industry leaders on Friday, where the president is expected to discuss strategies if Saudi Arabia and Russia fail to quickly agree to cut supply.
“Plan A made Saudi Arabia and Russia speak and cut. But if it takes too long or fails, the president will resort to Plan B – protectionist measures to help domestic producers, “said Bob McNally, chief of the Rapidan Energy Group consulting firm and former White House adviser.
While Harold Hamm, president of shale producer Continental Resources and friend of Mr. Trump, has publicly requested that the two oil-producing countries be investigated for price manipulation, Mr. Perry’s involvement has recently exercised more influence in the White House, said shale leaders.
“Perry is starting to turn the tide – he understands what’s going on and has close ties to the Midland crowd,” said one person familiar with the talks, referring to the Texan city at the center of the Permian shale business.
The White House made no comment on Mr. Perry’s involvement. A spokesperson for Mr. Perry said that although he “cares deeply about the US energy markets and the energy industry, he follows federal ethics and is not a lobbyist registered for no industry. “
In a recent Fox News interview, Perry said he would advise the President to tell US refineries to deal only with crude produced in the United States for the next 60 to 90 days and to send a “clear message that we’re just not going to let foreign oil flow in here. ”
Heads of API and US fuel and petrochemical manufacturers, another lobby group, wrote to Trump on Wednesday to oppose restrictions on foreign oil, saying that the possibility of buying from the world whole, “including those from the Middle East” was a “key benefit to American refineries”.
Trump said on Wednesday that the US oil industry was “ravaged” by the collapse in prices, warning of “tough” measures against Saudi Arabia and Russia. Shale companies have cut spending and drilling plans in recent weeks. On Wednesday, the Bakken shale specialist, Whiting Petroleum, became the first major producer to file for bankruptcy.
US efforts to drive up oil prices mark an embarrassing pivot for a president who has repeatedly called on the cartel to lower crude prices. But shale lobbying for a more aggressive posture against Russia and Saudi Arabia seems to be growing.
On Monday, two producers, Parsley Energy and Pioneer Natural Resources, formally introduced a motion to discuss statewide production cuts with the Texas Railroad Commission, which oversees the state’s oil and gas industry. The API also objects.
“The supermajors want a return to the dynamics of the cartel [in the US oil patch]”A leader of a shale producer said, adding that the big oil companies were acting against the interests of the country. “The API should remove the American from his name.”
“Rationing is still on the table,” Ryan Sitton, one of the regulator’s commissioners, said on Wednesday to the Financial Times, referring to the method by which Texas limited production by producers decades ago.
Some analysts have questioned whether such measures would work. “The scale of the collapse in demand for Covid-19 oil is staggering, and nothing the United States alone can handle,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University .
Additional reporting by Demetri Sevastopulo in Washington
American shale producers have launched an aggressive lobby campaign for new sanctions against Saudi Arabia and Russia, urging the White House to force oil-producing countries to cut production to support crude prices.
The industry appealed to President Donald Trump’s recently departed energy secretary Rick Perry for help, including advocating a blockage of Saudi crude shipments to the largest refinery in North America.
Shale producers face an existential threat since the collapse of demand in a context of global blockage of coronaviruses and a war of Saudi-Russian market shares which brought crude oil prices down to $ 20 a barrel . Most shale producers are unprofitable at prices below $ 50 a barrel, and bonds from some shale companies have sold strongly, with investors anticipating widespread bankruptcies in the sector.
Trump came to the aid of shale producers on Thursday, citing a possible production reduction agreement between Moscow and Riyadh, which has boosted crude prices by more than 20%. But the Kremlin has denied any pending deals.
The shale push comes despite resistance from the most powerful lobbying organization in the petroleum industry, the American Petroleum Institute, which represents the largest energy groups and opposes any control of supply.
Among the shale industry’s proposals are to prevent Saudi crude from reaching the kingdom’s large Motiva refinery in Port Arthur, Texas; foreign oil tariffs; or suspend the Jones Act, which helps make crude oil shipped by domestic suppliers more expensive than oil delivered by foreign tankers.
“The most successful idea is to target Motiva,” the largest refinery in North America, said an executive from a shale producer.
Shale producers are also urging the White House to consider suspending U.S. military aid to Saudi Arabia and imposing new sanctions on Russian energy – or to lift existing ones if the Kremlin cooperates. The United States recently imposed sanctions on a business unit of Rosneft, the Russian state-owned energy company.
Trump is scheduled to meet with oil industry leaders on Friday, where the president is expected to discuss strategies if Saudi Arabia and Russia fail to quickly agree to cut supply.
“Plan A made Saudi Arabia and Russia speak and cut. But if it takes too long or fails, the president will resort to Plan B – protectionist measures to help domestic producers, “said Bob McNally, chief of the Rapidan Energy Group consulting firm and former White House adviser.
While Harold Hamm, president of shale producer Continental Resources and friend of Mr. Trump, has publicly requested that the two oil-producing countries be investigated for price manipulation, Mr. Perry’s involvement has recently exercised more influence in the White House, said shale leaders.
“Perry is starting to turn the tide – he understands what’s going on and has close ties to the Midland crowd,” said one person familiar with the talks, referring to the Texan city at the center of the Permian shale business.
The White House made no comment on Mr. Perry’s involvement. A spokesperson for Mr. Perry said that although he “cares deeply about the US energy markets and the energy industry, he follows federal ethics and is not a lobbyist registered for no industry. “
In a recent Fox News interview, Perry said he would advise the President to tell US refineries to deal only with crude produced in the United States for the next 60 to 90 days and to send a “clear message that we’re just not going to let foreign oil flow in here. ”
Heads of API and US fuel and petrochemical manufacturers, another lobby group, wrote to Trump on Wednesday to oppose restrictions on foreign oil, saying that the possibility of buying from the world whole, “including those from the Middle East” was a “key benefit to American refineries”.
Trump said on Wednesday that the US oil industry was “ravaged” by the collapse in prices, warning of “tough” measures against Saudi Arabia and Russia. Shale companies have cut spending and drilling plans in recent weeks. On Wednesday, the Bakken shale specialist, Whiting Petroleum, became the first major producer to file for bankruptcy.
US efforts to drive up oil prices mark an embarrassing pivot for a president who has repeatedly called on the cartel to lower crude prices. But shale lobbying for a more aggressive posture against Russia and Saudi Arabia seems to be growing.
On Monday, two producers, Parsley Energy and Pioneer Natural Resources, formally introduced a motion to discuss statewide production cuts with the Texas Railroad Commission, which oversees the state’s oil and gas industry. The API also objects.
“The supermajors want a return to the dynamics of the cartel [in the US oil patch]”A leader of a shale producer said, adding that the big oil companies were acting against the interests of the country. “The API should remove the American from his name.”
“Rationing is still on the table,” Ryan Sitton, one of the regulator’s commissioners, said on Wednesday to the Financial Times, referring to the method by which Texas limited production by producers decades ago.
Some analysts have questioned whether such measures would work. “The scale of the collapse in demand for Covid-19 oil is staggering, and nothing the United States alone can handle,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University .
Additional reporting by Demetri Sevastopulo in Washington