RealClear Energy

Oil & Gas 360 Publishers Note:

The American oil and gas industry has been navigating some very challenging times.  A variety of ideas have been floated recently regarding how the Trump administration should respond in order to support the US oil and gas industry, to preserve jobs and defend our national security.  The ideas addressed in the following article, co-authored by EnerCom’s Director of Consulting Services, appear to be an assertive and immediate response, and potential solution, that requires no government spending programs or Congressional approval.  Oil & Gas 360 welcomes your comments and ideas at [email protected].

 

Amid Coronavirus, steps President Trump must take to protect American energy- oil and gas 360Amid Coronavirus, steps President Trump must take to protect American energy- oil and gas 360

 

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.

For the rest of the story click here: RealClear Energy

by:

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: [email protected]

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 [email protected] and follow him on Twitter @DanielTurnerPTF

 


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