Thursday, April 23, 2020
In the best of times, it can be among the most unpopular industries, lawmakers in some states—among them California—even having advocated a ban on production of oil and natural gas.
In the worst of times, which 2020 continues to be for energy companies, the threats may be even more daunting.
Former U.S. Energy Secretary Rick Perry recently warned that the U.S. energy industry could go belly-up, a victim of the COVID-19 pandemic and the drastic decline in prices due to lessened travel and Saudi Arabia’s strategic overproduction.
Prices have continued a historic plunge, even turning negative for the first time ever on April 20—traders paying to get rid of what used to be deemed black gold, and experts anticipating no imminent rebound.
“Our capacity is full,” Perry told Fox News host Tucker Carlson recently. “I’m telling you, we are on the verge of a massive collapse of an industry that we worked awfully hard, over the course of the last three or four years, to build up to the number-one oil and gas producing country in the world, giving Americans some affordable energy resources.”
It’s not just the big-name players at risk, Perry went on to say. A weakened or collapsed energy industry is being felt by small and medium-sized independent companies that process, deliver and market oil and gas. Then there would be the hardships faced by everybody who uses energy—which, of course, is everybody.
With these variables confronting its membership, the general counsel for an energy industry trade association tries to anticipate any coronavirus consequences that may affect oil and gas producers and refiners in Arizona, California, Nevada, Oregon and Washington.
New normal for energy industry
“This is a very unprecedented time we’re facing as a nation, as a world,” Oyango Snell tells Vanguard from the Sacramento headquarters of the Western States Petroleum Association. “We’re an industry essential to the nation’s economic health and we’ve seen significant impact from this virus. It’s very uncertain what normalcy will look like post-virus. There’s no blueprint or crystal ball for us to gaze at.”
A one-time Chicagoan who entered a career in law and government affairs after a first-hand education in Windy City politics, Snell knows well Rahm Emanuel’s famous line about “never let a crisis go to waste.” He just hopes that line of thinking won’t be put to practice by those who have long referred to “Big Oil” disparagingly.
Already he’s heard speculation that the oil and gas companies would use their current plight as a case for rolling back regulations intended to mitigate climate change in, among other places, the Golden State.
“We’re an industry essential to the nation’s economic health and we’ve seen significant impact from this virus. It’s very uncertain what normalcy will look like post-virus. There’s no blueprint or crystal ball for us to gaze at.”
“It’s really the total opposite,” says Snell. “We’re much more about working directly with lawmakers and regulators in a way that protects our workers and the communities in which they operate.”
As far as safety matters go, Snell emphasizes his role is strictly advisory to WSPA’s 14 member companies—among them ExxonMobil, Phillips 66, Shell and Chevron. He can’t order them to practice social distancing among roustabouts on the rigs or to have plans and protocols for those sickened.
Then again, Snell says he doesn’t have to; the companies having taken precautionary initiatives. He also reminds that some of these companies have lent their capabilities toward providing N95 face masks for healthcare workers and hand sanitizers for first responders. The demand for those devices is higher than that for oil, filled-to-the brim tankers lacking places to unload.
Beating back the COVID bans
Prior to the virus, Snell says WSPA’s focus was countering political initiatives that threaten the energy industry, among them efforts to ban California oil and gas production, and to ban use of natural gas in some of the state’s municipalities. Such bans would prove costly to all Californians, WSPA says.
“Now, with the virus in place, our legal challenges have taken a back seat to protecting our workers and the communities where they work,” Snell says. “Hopefully things will return to pre-virus normalcy, but it’s doubtful that things will ever be the same. There’s a lot we have to think about before a second virus or pandemic comes along.”
Also, an erstwhile three-term Texas governor, former Energy Secretary Perry had some ideas during his one-on-one with the host of “Tucker Carlson Tonight.”
He’d have President Trump order refineries to use only U.S. crude for the next two or three months. Meanwhile have the U.S. Treasury prop up the industry backbone by buying oil futures.
WSPA hasn’t advocated any measures so drastic even with the average price in the United States now well below $2.00 a gallon and some industry executives warning of a Faustian bargain.
“We’re operating as an industry leader in very uncertain times and have to prepare for any number of scenarios,” Snell says. “What will normalcy look like post-virus? How do we adapt operations in our states if the laws and regulations change? How do we bring more value-add to the table?
“We hear how the oil industry won’t return to normal, but I don’t think any industry will. What we can do is emerge, albeit different, but better.”