President Donald Trump on Tuesday directed Energy Secretary Dan Brouillette and Treasury Secretary Steven Mnuchinto come up with a plan to inject cash into the ailing US oil and gas industries as historic sell-off in oil continued. Trump's order comes a day after U.S. crude oil price plunged more than 190% for the month of May in a matter of a few hours, hitting a historic low.
The coronavirus outbreak has been crushing demand for oil, while rising stockpiles overwhelm storage facility across the United States. Oil prices have been taking a beating ever since the coronavirus outbreak, which has seen a considerable decline in demand for fuel as people continue to stay at home.
Trump comes to oil industry's rescue
On Tuesday, Trump instructed Energy Secretary Dan Brouillette and Treasury Secretary Steven Mnuchinto put together a plan and arrange for funds to bail out the struggling US oil and gas industry. "I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!" Trump tweeted on Tuesday.
However, Trump didn't specify in his tweet how much money would be made available or the oil and gas companies that will be eligible to receive the fund. Also, the White House is yet to comment on Trump's announcement. Trumps' promise to bail out oil and gas companies came as a crude futures contract continued trading with a negative price, a day after hitting a historic low.
Crisis looms large on oil and gas companies
The price on the May futures contract for the West Texas Intermediate crude that expires on Tuesday finished down $55.90, or 306%, entering negative territory at minus $37.63 a barrel. This is the first time that crude oil prices dropped below zero. The one-day plunge is also the largest on record since New York Mercantile Exchange opened oil features trading in 1983.
The oil and gas industry has witnessed historic sell-off due to the coronavirus outbreak. Measures like lockdowns to curb the spread of the deadly virus continue to crush fuel demand, leaving behind stockpiles that countries are struggling to store. Also, the Department of Energy is planning to pay domestic oil producers to take the responsibility of storing crude oil in the ground.
Brouillette last week had told that he is working with US regulators and the banking industry to ensure that financial institutions don't marginalize oil companies when it comes to providing credit amid the coronavirus crisis. The US oil and gas industry owes over $200 billion to lenders through loans backed by oil and gas reserves. Given that revenues have taken a hit and asset value has declined, many are saying that repaying the loans may now be an upheaval task.