The US oil industry has had a particularly tough time coping with the Covid-19 pandemic despite numerous federal relief measures to help ease the pain.
The US oil industry is trying to recover from the worst demand shock in the history of oil markets. Some companies launched the long-awaited consolidation in the sector, while many others filed for bankruptcy as unsustainably low oil prices this year weighed on already weakened balance sheets. The US shale patch had access to some form of government relief during the pandemic, like all businesses in the United States. The oil and gas industry received tax breaks, royalty relief, and forgivable loans under the Paycheck Protection Program to keep employees during the pandemic.
Yet, bankruptcies in the shale patch started to accelerate in the second quarter after oil prices crashed in early March because of the demand collapse and the Saudi-Russian price war. US drillers immediately scaled back capital spending and curtailed more than 2 million barrels per day (bpd) of oil production between April and June in response to the crash in prices.
Thousands of jobs in the industry have been lost over the past six months, and a good portion of those jobs lost may never return.
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The US shale patch has been struggling this year and is bracing for more hardship with the incoming Administration of Joe Biden, who has vowed to ban new oil and gas drilling on federal lands and waters.
The federal relief during the pandemic, especially royalty rate reductions on federal land and offshore, has not been very effective because of a lack of uniform decision-making, the nonpartisan Government Accountability Office (GAO) said last month.
Environmental advocates, of course, point the finger at the mere fact that the federal government dared provide relief for the fossil fuel industry.
According to a new analysis by BailoutWatch, Public Citizen, and Friends of the Earth, the fossil fuel industry received between US$10.4 billion and US$15.2 billion in direct economic relief, with more than 26,000 coal, oil, and gas companies benefiting directly. In addition, indirect benefits in the form of bond funds bought by the Fed and billions of newly issued company bonds “pushed government aid to the industry past US$110 billion,” say the activists in their report Bailed Out & Propped Up, which slams government support to the “money-losing dirty energy companies” and shames the firms that made use of federal government programs. The report goes on to recommend that “Congress must explicitly exclude further aid to the fossil fuel industry from any future coronavirus relief packages.”
The Fed wasn’t spared in the report either: “By insisting fossil fuel companies deserve protection and support, the Fed has exacerbated the already dire threat of climate change, prolonging oil and gas companies’ ability to borrow money at lower rates than investors were willing to offer before the pandemic,” the authors say. (RT)
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