After oil prices plummeted well below zero Monday, President Donald Trump said Congress should approve the purchase of as much as 75 million barrels for the Strategic Petroleum Reserve.
“This is a great time to buy oil and we’d like to have Congress approve it,” Trump said Monday evening during the White House coronavirus briefing. “If we can buy it for nothing, we’re going to take everything we can get.”
Prices fell sharply to levels never seen before, closing at negative $37.63 per barrel Monday after opening at $55.90. The Department of Energy said on April 14 that it was negotiating with oil companies that want to lease space in Strategic Petroleum Reserve facilities to store excess oil they could not immediately sell.
The continuing oil market woes are likely to amplify calls from oil state lawmakers for Congress to move legislation to aid the industry, including by buying up some of the excess product.
Crude prices have continued to fall for several weeks as the coronavirus pandemic slowed global demand, exacerbating market problems brought on by a supply glut and a price war between Russia and Saudi Arabia.
Lawmakers from oil states, including Alaska GOP Sens. Lisa Murkowski and Dan Sullivan, and Sen. Kevin Cramer, R-N.D., have continued to push for Congress to make available $3 billion for the Energy Department to buy crude at low prices to soak up excess supply and fill federal stockpiles to the brim. The lawmakers have introduced a draft bill that they want included in a coming coronavirus economic relief package.
It was not clear if congressional approval would be needed for the department to acquire oil at a negative price.
“Today’s collapse poses a devastating threat to our oil and gas sector, with job losses in the thousands and national security being weakened if the industry cannot recover,” Cramer told CQ Roll Call through an aide.
“The dramatic low underscores why we cannot allow Saudi Arabia to flood the market," Cramer said. "Right now, the highest number of Saudi oil tankers in years is on its way to our shores. Given today’s news, I call on President Trump to prevent them from unloading in the United States.”
In the meantime, the DOE is moving ahead with plans to lease space in Strategic Petroleum Reserve facilities to oil companies running out of storage because of the low demand and excess supply. The companies would borrow space in the stockpiles and pay for it by leaving some of their oil in the reserves when they withdraw.
A deal reached less than two weeks ago between OPEC countries and Russia to stabilize oil markets by cutting their production was not enough to stop the market turmoil.
“The problem is nobody's driving a car anywhere in the world…factories are closed and businesses are closed,” Trump said, dismissing suggestions that the oil-producing countries need to cut more, instead saying the markets will control the industry’s decisions.
Oil market analysts and some lawmakers say they don’t expect the industry to start to rebound at least until the world has overcome the coronavirus pandemic and economies reopen. “Setting aside the dynamics of today’s trading, Senator Murkowski recognizes the oil emergency will continue as long as the pandemic persists,” said Grace Jang, a spokesperson for Murkowski.
“Ultimately, oil demand and prices will only recover when economic growth recovers,” Jang said.
Josiah Neeley, a senior fellow focusing on energy issues at the free-market oriented R Street Institute, said buying oil for the national stockpiles may be “sensible” because of prices but wouldn't solve the absence of demand.
“The amount of extra oil that you would be able to take off the market through that mechanism is probably pretty limited compared to the overall situation,” Neeley told CQ Roll Call. “It seems like demand is going to be significantly depressed, and that's the reality that we're living in.”