https://youtu.be/F-ItyzuKyQo
Excellent new #hottake from DRW, once again in both audio and visual formats
As mentioned on the podcast and on LinkedIn posts, David was asked to provide members of the Executive Branch a whitepaper on Governmental Responses to the Domestic Production Crisis.
In short, the white paper discusses what steps to take, with the keys being:
A) it rebalances the market in this crazy time and
protects companies from a full unstructured collapse and chapter 11
B) if adopted would immediately retaliate (ban) flaring
which would be environmentally better and aid in rebalancing the market
C) lower capital activity in the US to a sustainable
level and aid the transition of energy policy
D) support workers who are currently and will be
displaced out of the industry until the economy stabilized post COVID-19
E) uses tariffs on imported oil to finance and back the plan, supporting America’s energy independence go forward.
White Paper follows:
White Paper
Stabilization of the United States Oil & Gas Industry
March 16, 2020
Purpose
The
purpose of this paper is to propose necessary federal action to stabilize the
United States oil and gas industry, protect domestic energy independence, and
avoid widespread economic hardship which will result from the collapse of one
of America’s most prominent industries.
Executive
Summary of Key Actions Proposed:
* Shut
in production on all federal onshore and offshore leases, impacting an
estimated 2.8 million barrels per day of supply.* Provide
covenant guarantees to those companies affected for 180 days for the COVID-19
crisis to pass* Implement
a $30/bbl tariff on all imported crude, excluding Canada. Part of this tariff would be used to support
hourly, field, oilfield service and midstream staff impacted by the reduction
in activity.* Cut
U.S. crude exports to 0 until the US SPR is refilled.
Background:
The importance of the oil and gas
industry to America cannot be understated. The sector contributes significantly
to the American economy through employment, tax revenue, and support of
consumer economy. For example, according to the 2019 U.S. Energy and Employment
report, the fuels sector, which includes oil and gas exploration and
extraction, employed 1,127,600 workers[1] and under President
Trump’s energy agenda, total energy production across various sources reached a
record high in 2018[2].
Increased domestic production and exports of crude oil made significant
contribution to the flourishing economy under President Donald Trump.
As a result of vulnerable balance sheets,
perilous declines in demand due to the COVID-19 pandemic, and international
price instability the industry is now in a state of emergent decline. Reduced
production by OPEC and Russia enabled the U.S. to grow production to a record
of 12.863 million barrels per day in 2019[3] at a $50-$55/bbl price
environment. Recently, Russia rejected the OPEC recommended continuation of
production cuts from member countries. Saudia Arabia responded with a threat to
increase production and signaled the initiation of a price war.
