Trump administration prepares to buy 30M barrels of oil amid industry slump

Trump administration prepares to buy 30M barrels of oil amid industry slump
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The U.S. government will buy 30 million barrels of oil from producers amid a financial downturn for the industry. 

The Department of Energy (DOE) announced Thursday it would conduct the sales to fill the Strategic Petroleum Reserve (SPR), fulfilling a pledge by President TrumpDonald John TrumpDavis: Supreme Court decision is bad news for Trump, good news for Vance Meadows trying to root out suspected White House leakers by feeding them info: Axios Pressley hits DeVos over reopening schools: 'I wouldn't trust you to care for a house plant let alone my child' MORE to offer assistance to the oil industry as prices plummet with the twin threats of the coronavirus and a pricing war between Saudi Arabia and Russia. 

“It is a common sense move. Everyone who has done any version of investing knows you try to buy low and sell high. The same goes with filling the SPR over time,” Energy Secretary Dan Brouillette said in a call with reporters.

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This initial purchase comes as oil has fallen to about $25 per barrel, down from roughly $50 a month ago and a steep decline from the average $60 pricetag for oil already in the reserve.

The 30 million barrel purchase announced Thursday is a far cry from Trump’s Friday pledge to fill America’s emergency fuel supply “right up to the top,” maxing out at 77 million barrels. 

But DOE said it plans to hold additional sales, perhaps as soon as in two to three months, and is preparing to ask Congress for $3 billion to fill its fuel reserves.

The purchase comes as Treasury Secretary Steven MnuchinSteven Terner MnuchinOn The Money: Supreme Court upholds NY prosecutors' access to Trump's tax returns, rebuffs Congress | Trump complains of 'political prosecution' | Biden rebukes Trump, rolls out jobs plan Mnuchin: Next stimulus bill must cap jobless benefits at 100 percent of previous income Why Trump can't make up his mind on China MORE floated spending as much as $20 billion to assist the oil industry, figures Brouillette said the two had not discussed.  

Stocking up on oil will no doubt anger some Democrats, who have repeatedly warned that coronavirus aid should include no lifelines for the fossil fuel industry.

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“Diverting public funds to bail out this industry will do nothing to stop the spread of this deadly virus or provide relief to those in need,” House lawmakers wrote in a Tuesday letter spearheaded by Rep. Nanette Diaz Barragán (D-Calif.). “A bailout tells the American public that fossil fuel investors can rely on U.S. taxpayers to cover their bills when the industry’s corporate executives’ risky investments don’t pan out.”

Democrats in the Senate echoed a similar sentiment, fearing that money spent propping up the oil industry will accelerate climate change.

“Using federal assistance—including low-interest loans, royalty relief, tax breaks, or strategic petroleum reserve purchases—in order to prop up oil companies would be a wasteful misuse of government resources that would exacerbate the climate crisis,” Sens. Ed MarkeyEdward (Ed) John MarkeyGOP senators debate replacing Columbus Day with Juneteenth as a federal holiday The Hill's Campaign Report: Jacksonville mandates face coverings as GOP convention approaches Steyer endorses Markey in Massachusetts Senate primary MORE (D-Mass.), Jeff MerkleyJeffrey (Jeff) Alan MerkleyHillicon Valley: QAnon scores wins, creating GOP problem | Supreme Court upholds regulation banning robocalls to cellphones | Foreign hackers take aim at homebound Americans | Uber acquires Postmates QAnon scores wins, creating GOP problem Democratic senator will introduce bill mandating social distancing on flights after flying on packed plane MORE (D-Ore.) and Bernie SandersBernie SandersBiden wins Puerto Rico primary In politics, as in baseball, it ain't over till it's over Biden wins Louisiana primary MORE (I-Vt.) wrote in a letter to Trump.

Purchasing 30 million barrels now, even with record low oil prices, would still carry a significant cost, coming in at just below $1 billion.

But Brouillette told reporters he feels confident he has the backing from Congress as it weighs future coronavirus relief packages. 

Numerous Republicans have already expressed support for the purchase — House Minority Leader Kevin McCarthyKevin Owen McCarthyCongress under pressure to provide billions for school openings Supreme Court rulings reignite Trump oversight wars in Congress The Hill's Campaign Report: Florida's coronavirus surge raises questions about GOP convention MORE (R-Calif.) pegged it as “the right call.”

And when asked if he had personally heard pushback from Democrats, Brouilette simply said, “No, I have not.”

The offer to purchase crude is only open to small- and mid-sized U.S. companies with fewer than 5,000 employees. The oil itself must be produced within the U.S. as well. 

With current prices, the U.S. could fill its petroleum reserve with less than $2.1 billion but Brouillette said he expects prices to begin to rise as coronavirus’s hold on the economy settles down, increasing the overall cost of filling the SPR. He also said the department may limit future purchases if oil prices rise rapidly, potentially due to a resolution between Saudi Arabia and Russia. 

“We have every expectation that once we’re beyond this coronavirus pandemic we’re going to see a very robust upturn in demand and very strong economy coming back, but at this point in time we don’t know exactly when that will occur so we’re just trying to be as cautious and conservative as possible,” he said. 

—Updated at 2:07 p.m.