Trump's New Idea: Pay Drillers Billions to Leave Oil in the Ground

Mish

Under a plan hatched by the Trump administration, the Energy Department would pay oil producers not to produce.

Hey, let's bail out all the oil speculators. They voted for me, didn't they?

If that's not the general idea, then what is?

Please note U.S. Weighs Paying Drillers to Leave Oil in Ground Amid Glut.

The Energy Department has drafted a plan to compensate companies for sitting on as much as 365 million barrels worth of oil reserves by effectively making that untapped crude part of the U.S. government’s emergency stockpile, said senior administration officials, who asked not to be identified describing deliberations prior to a decision and announcement.

The keep-it-in-the-ground plan would require billions of dollars in appropriations from Congress -- and the administration just recently lost a bid in Congress to spend $3 billion buying oil for the government’s strategic reserve. A deal like this could be unprecedented and reflects a Trump administration push to help domestic drillers battered by a surge of oil production and a collapse of demand tied to the coronavirus.

Analysts, including experts at Wood Mackenzie and IHS Markit, expect storage tanks to fill by summer, if not sooner. Whenever that happens, oil producers with no place to put their crude would be forced to halt production and lay off workers.

To prevent layoffs due to storage capacity filling, the proposal is to pay workers to do nothing.

The theory is the US would buy oil at these prices and profit. In practice the strategic reserves are full or nearly so.

What About Zombification?

I am sick of bailouts. Some claim it will Zombify the industry.

And whatever happened to Kudlow's idea?

In case you forgot, please consider Lower Oil Prices Are Unambiguously Good by Larry Kudlow, now Trump's top economic advisor.

Basically, the fracking revolution has delivered a powerful and positive supply shock to the economy. It means that more output increases real growth and reduces inflation for any given increase in nominal GDP — the exact opposite of what we saw in the 1970s.

Falling energy prices are so good for the economy that a new Republican Congress, in its first 90 days, should put a bill on President Obama’s desk authorizing the Keystone Pipeline, opening federal lands to energy development, and ending oil export restrictions. Totally pro-growth.

Hmm.

What's Larry saying now?

Art of a Failed Oil Deal

Two days ago, the Wall Street Journal bragged about Trump's fabulous deal to save the US oil industry.

Following a ridiculous spike on the announcement, oil then plunged to an 18-year low.

For details, please see The Art of a Failed Oil Deal

This new bailout proposal is an admission Trump's deal failed.

Mike "Mish" Shedlock

Comments (45)
No. 1-17
az_dirt
az_dirt

I will be filing paperwork today for "Petroleum Resource RecoveryLLC" and would like to know where I need to apply for the handout, err, bailout. Thank you.

njbr
njbr

The intent is not to save workers jobs it's to save investors who gambled on a rising oil market. Its a rebate on mineral rights not extracted and profit not realized. Doesn't every casino give you a free dinner when you lose thousands?

tokidoki
tokidoki

The Fed can bail them out under the guise of maintaining employment.

Who's going to stop them? No one.

davebarnes
davebarnes

Sounds like Socialism to me.
The GOP could not possibly support socialist actions.
I mean, socialism causes Lindsay Graham to have the vapors.

Wmjack50
Wmjack50

Energy and Food two things that we all need! And for this reason the Government has for decades supported Farmers with bailouts and price supports that other nonessential business do not have . NOW energy has hit a market condition that is unprecedented. Thus the government will rightly bail and support this vital industry. OR we can all enjoy walking and food lines.

AWC
AWC

And the Soviet Union saved billions that would have gone into expanding power generation capacity,,,,,,,,

By simply shutting down the light bulb factories.

Zardoz
Zardoz

The workers won’t see a dime of that money.

killben
killben

"I am sick of bailouts"

I have been sick of bailouts since 2009. Scoundrels one and all. And the audacity to tell us it is for main street, for saving capitalism, having courage to act blah blah blah. When lawlessness becomes the law of the land, it shows depravity and nothing else. If people do not wake up now and take up the pitchforks god knows when it is gonna happen. God only can save us from such self-appointed protectors in wolf's clothing.

ReadyKilowatt
ReadyKilowatt

There are a lot of oil drilling leases on public land. Just revoke the leases and save a few billion dollars. Sure, you're going to lose the revenue from production, but this idiotic idea will keep the "revenue" from the leases coming in.

wootendw
wootendw

"Lower Oil Prices Are Unambiguously Good" - Kudlow

False. Lower oil prices are beneficial if they are caused by a glut in production. But if oil prices fall due a drop in demand, it's a clear sign of a declining economy in the near future. The latter is clearly occurring now whether or not there is any glut.

Tony Bennett
Tony Bennett

A View From The (unemployed) Person In The Street:

Hhmm, this will make what I pay at the pump higher ... and, much more importantly, this money could be going to me or my former employer (for restart).

aarti202
aarti202

This is madness! We are hell bent on propping up a dying industry, meanwhile where are the checks for main Street workers?

awc13
awc13

my school district is paying bus drivers to not drive. we pay farmers to not farm. so why not oil pumpers to not pump?

I am not for any of that, just pointing out how that thinking permeates our society

aqualech
aqualech

Not that it’s right to do this, but it would be par for the course in today’s world of crony “print and grift”. I’m jealous - I ain’t getting nuttin.

Silver2020
Silver2020

The unintended consequences of covert 19 is quantitative easing for the planet. Yes printing money and paying drillers to keep oil in the ground is an idea that has been around for a while to save the planet.

Silver2020
Silver2020

Printing money and paying drillers to keep oil in the ground is quantitative easing for the planet!


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