The Trump administration said Thursday it is seeking $3 billion from Congress to boost the country’s strategic petroleum reserves, potentially propping up U.S. oil producers after crude prices crashed globally.
President Donald Trump had directed the Energy Department last week to fill the nation’s emergency stash of crude oil to the top, over objections from congressional Democrats who said he was favoring climate-damaging fossil fuels and the profits of oil giants.
Plummeting crude prices benefited U.S. consumers filling up their cars, Trump said Thursday. “But on the other hand, it hurts a great industry, and a very powerful industry,” Trump told reporters.
West Texas crude prices fell below $21 a barrel Wednesday after oil producers Russia and Saudi Arabia stepped up pumping, threatening the market share of U.S. oil, and as the coronavirus moved the world toward recession and tamped down consumer demand for energy.
Energy Secretary Dan Brouillette told reporters Thursday the move was about filling up the country’s 713.5 million barrel Strategic Petroleum Reserve at a time of cheap oil, not about throwing the U.S. oil industry a lifeline in rough markets. The reserves are stashed underground in Texas and Louisiana.
“It’s a common-sense move. Everyone who’s done any personal investment knows you do your best to buy low and sell high,” Brouillette said.
Brouillette also denied the U.S. was intervening against market forces to prop up oil. Pointing to Russia and Saudi Arabia’s surge of production, he said the purpose of the nation’s strategic oil reserves is “to mitigate this type of disruption.”
Congress has to approve the money for the purchases. The administration must overcome opposition from some Democratic lawmakers.
The U.S. has been selling down some of its reserves, so filling the reserves back up when oil is cheap makes sense, said Ryan Fitzmaurice, energy strategist at Rabobank. But it won’t have much impact on the imbalance of supply and demand because Saudi Arabia is ready to ramp up production by 3 million barrels per day next month.
“It’s not going to change the balance too much, and the Saudis are going to increase supply by far much more than we can buy,” Fitzmaurice says.
The U.S. would seek to buy 30 million barrels of U.S.-produced crude initially and a total of 77 million barrels eventually, Brouillette says.