Airlines, restaurants, retailers, farmers and a slew of other industries are getting billions of dollars in bailouts as the U.S. economy contracts because of the coronavirus pandemic — but America’s oil companies are hitting a dry hole.
U.S. oil futures prices fell to their lowest-ever level by far on Monday, at -$37.63 per barrel, meaning owners of the futures contracts were paying to offload them. It broke the previous low price record near $10 a barrel set in 1986 and comes as policymakers struggled to address the glut of crude that has seen the industry reverse a decade-long boom and sink into a deep recession that threatens to push dozens of companies into bankruptcy
U.S. policymakers for decades have focused their policies on ensuring the oil supply shocks that damaged the U.S. economy in the 1970s would not return, and they created a national reserve to backstop the market and ensure supplies were available to fill up the nation’s fleet of automobiles and trucks. But with U.S. production hitting record levels late last year and storage tanks now brimming with fuel, Washington has few tools at its disposal to lift oil prices to levels needed to sustain the energy industry.
“The U.S. government’s ability to fundamentally change this situation are minimal,” said Raymond James oil analyst Pavel Molchanov. “The real problem is the fact that upwards of 20 percent of global oil demand is currently offline, mainly due to the Covid-related lockdowns.“
President Donald Trump won praise last week for helping push Russia and Saudi Arabia to end a market standoff and reduce shipments oil. But those cuts won’t take effect until next month, hurting near-term prices for crude and leaving oil producers scrambling to find storage for their production.
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