May 8, 2020 - Energy & Environment

Coronavirus brings the new politics of oil into the 2020 race

Illustration of American flag with coffee mugs replacing the stars

Illustration: Rebecca Zisser/Axios

The oil industry's painful retrenchment amid the collapse in demand and prices is bleeding into Beltway political battles over pandemic response — and probably into the 2020 election.

Driving the news: Sen. Elizabeth Warren is bashing the brewing Trump administration plan to help distressed U.S. producers, warning against financial aid she says would sap resources better spent elsewhere.

  • Her open letter yesterday to the Treasury Department also says it would be inappropriate in light of the industry's emissions and posture on climate policy.
  • On the same day of Warren's letter, President Trump's campaign used Texas Gov. Greg Abbott's visit to the White House to tout the president's vows to aid the sector, highlighting this recent Abbott tweet in a press release.

Why it matters: Warren is among the highest profile Democratic lawmakers and a potential VP pick for White House hopeful Joe Biden.

  • But she's hardly the only vocal Democrat on oil policy during the pandemic.
  • A number of House and Senate Democrats are floating a messaging bill that would close off a bunch of financial aid avenues for the sector.

The big picture: The Beltway tension over aid shows how the coronavirus pandemic has upended the role of oil in political battles over energy and climate.

  • Heading into the election cycle, President Trump was fond of touting the domestic boom, which has been unfolding over a decade and transformed the U.S. into the world's largest producer (though a number of companies were financially stressed even before COVID-19).
  • His promotion of U.S. "energy dominance" contrasted with the Democratic vows to thwart new oil-and-gas development and implement tough climate policies.

Why you'll hear about this again: NYT's Lisa Friedman reports that the pandemic has entered political battles over energy and climate in a way that goes beyond the oil sector's upheaval.

  • The piece explores how Republicans and conservative groups are seeking to use the economic crisis as leverage against Democratic climate proposals.
  • "The Republicans’ line of attack is going to be that the Democrats are trying to create a massive Green New Deal that’s going to create a lot of spending at a time when we just can’t afford that," veteran GOP operative Ron Bonjean tells the paper.

What we're watching: How and whether Biden addresses the topic of the oil industry's change in fortunes due to the pandemic.

  • Biden's platform crafted before the pandemic already calls for ending new leasing on federal lands and waters, but I'm not aware of him specifically discussing the sector's financial woes.
  • His campaign did not provide comment yesterday when asked about Warren's letter.

What we don't know: It's not clear what forms of aid the administration is planning to offer.

  • Trump last month tasked the Treasury and Energy departments to construct an industry-specific financial aid plan, but it has not yet been unveiled.
  • The Fed has expanded access to its Main Street Lending Program in a way that should allow more oil companies to qualify, but Dallas Fed president Robert Kaplan cautions that it's not meant for deeply distressed firms.

Go deeper: A world locked down and drowning in oil

Go deeper