Thursday, April 16, 2020

Trump Considering Paying Oil Drillers Not to Drill Oil

The Trump administration is considering paying U.S. oil producers to leave crude in the ground, reports Bloomberg.

The Energy Department has drafted a plan to compensate companies for sitting on as much as 365 million barrels worth of oil reserves. The angle is to technically call it untapped crude for the U.S. government’s emergency stockpile.

According to Bloomberg, federal law already gives the Energy Department authority to set aside as much as 1 billion barrels of oil for emergencies -- without dictating where they should go. That creates a legal opening for storing crude outside the government’s existing reserve and even blocking its extraction in the first place. In this case, the government would essentially buy the oil locked underground but ask producers to hold off on extracting or delivering it.

With some 635 million barrels already stored by the government inside underground salt caverns in Texas and Louisiana, it has the authority to add up to 365 million more as long as Congress approves money for the transaction. At current prices, it could cost at least $7 billion.

This plan brings up memories of US government efforts to prop up prices during the Great Depression.

The last thing you want is higher prices which puts additional burdens on businesses and consumers.

This is another example of how the country is becoming more crony with those close to power gaining an edge. In this case, it is individuals such as Continental Resources founder Harold Hamm, who is personally close to Trump and, yes, Crown Prince Mohammed bin Salaman who is close to Trump and his son-in-law Jared Kushner. Damn American consumers.



  1. The US federal government has been waging war since at least the early 1990s to keep oil prices up. (by keeping oil off the market or controlled by the cronies) This program is at least far less destructive and cheaper.

  2. Not just damn the consumers, but producers of goods and services too. Well so much for contracts I was hoping might just be delayed a while but eventually come to fruition. Why would an oil company pay my company to haul their freight to the oil fields of Prudhoe Bay if they can get paid to leave it? Holy crap, I thought paying farmers not to farm was lunacy. This takes the grand prize.
    And like you said Robert, if the economy is hurting, dying, why would you want energy, what businesses use to get back to producing, to be artificially high? Is Exxon that close to extinction??? Man this pisses me off. Trump is a damn corporatist evil power hungry maroon.

  3. During the Great Depression most of the oil-producing states (led by Texas) instituted "pro-rationing" to get their oil prices up. State regulators issued quotas on crude oil production and the Feds passed appropriate legislation (the Connelly Act) to allow the state cartel system to work.