Business

Trump Vows to Reinforce U.S. Drillers Amid Exceptional Downturn

(Bloomberg) — President Donald Trump convened an extraordinary gathering of the oil industry’s competing factions at the White House on Friday and vowed to support them as a global pandemic and oil-price war weigh on their markets.

“We’ll get our energy back,” Trump said during a portion of Friday’s meeting that was open to reporters. “I’m with you 1,000%. It’s a great business, it’s a very vital business and honestly, you’ve been very fair. You’ve kept energy prices reasonable for a long period of time.”

Trump has sought to broker a deal with Russia and Saudi Arabia to end an oil price war that sent crude futures plunging to 20-year lows by cutting back on production. That could boost prices and help drillers located in states such as Texas and Louisiana that are crucial to his re-election in the fall. Canada is also in talks with OPEC and the U.S. about the state of the global oil market.

But there are deep divisions among the various factions of the U.S. oil industry over what should be done, especially on the question of domestic production cuts and possible tariffs on Saudi Arabian oil. Tariffs could hurt some executives who are among his most ardent supporters. The president told reporters following the meeting that duties on oil imports were discussed.

“Tariffs are a way of evening the score. Am I using it for oil? It’s something we can,” Trump told reporters after the meeting. “Am I doing it now? No. Am I thinking about imposing it as of this moment? No. But if we are not treated fairly, its certainly a tool in the toolbox.”

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Unpopular Moves

It isn’t clear whether Russia and Saudi Arabia would agree to cut output unless the U.S. also takes part — a move that would be unpopular with some U.S. producers. Trump did not say after Friday’s meeting whether the U.S. would be willing to commit to a cutback.

“These are great companies, and they’ll figure it out,” he said. “It’s a free market. We’ll figure it out.”

ClearView Energy Partners analysts said Trump’s comments indicated the U.S. is likely to prod the Russia-Saudi talks along not by expressing a willingness to cut U.S. production but rather a willingness to impose tariffs.

Meanwhile, a meeting of OPEC+ oil cartel members is set for Monday. Russian President Vladimir Putin said his country is prepared to take part in deep reductions in oil production.

In a separate meeting with industry representatives on Friday, Energy Secretary Dan Brouillette told oil industry representatives that he expected a Saudi-Russia deal on crude production cuts within days. Brouillette did not provide other details on what a deal might look like, though he stressed the Energy Department is working with counterparts in Saudi Arabia and Russia, people familiar with the call said, asking not to be identified because the conversation was private.

West Texas Intermediate crude suffered its biggest-ever quarterly decline in the three months through March. Even after the past two days’ rally, futures are still down more than 50% this year.

From industry, chief executives including Exxon Mobil Corp.’s Darren Woods, Occidental Petroleum Corp.’s Vicki Hollub and Energy Transfer LP’s Kelcy Warren attended the meeting with Trump, as did Greg Garland, chairman and CEO of Phillips 66, and Mike Wirth, chairman and CEO of Chevron Corp.

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One of the most contentious matters among the oil giants is whether Trump should slap tariffs on Saudi crude to get the kingdom to reduce its output.

It’s an idea championed by Oklahoma oil executive Harold Hamm, a Trump confidant on energy who also attended the meeting Friday, as well as some Republican senators who say tariffs could help the president win concessions from Saudi Arabia and stabilize the global crude market.

At the meeting Friday, Hamm thanked Trump at the meeting Friday for speaking to Putin and Saudi Crown Prince Mohammed bin Salman about the issue.

Tariff Option

Tariffs are also a weapon of choice for the president, who has wielded it against China, foreign steel producers and during trade negotiations with Mexico and Canada. Within the oil industry, the idea has exposed deep rifts, with refiners and Northeast U.S. gas producers firmly opposed.

“If they were to go down this route it would probably result in some refineries shutting down completely,” said Chet Thompson, head of the industry’s top trade group, the American Fuel & Petrochemical Manufacturers.

Large, integrated industry giants such as Exxon and Chevron, which were represented in the meeting Friday, have typically opposed any kind of government intervention in crude markets. They have better access to capital and are more diversified than independent producers, making them more resilient to ride the rout.

Trump again Friday called for purchasing oil for the nation’s emergency reserve during the meeting. Funding for the purchases was earlier spiked by Congressional Democrats, but Trump on Friday said they should “go back and see” if it could be included in “another bill.”

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Brouillette, speaking at the meeting, said the Energy Department is still planning on purchasing oil for the reserve without providing more details.

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