The American Petroleum Institute wants to avoid political baggage that could come from any special government program helping the beleaguered sector, Axios' Amy Harder reports.
What they’re saying: "Once you invite the government into these businesses, there are long-term repercussions for that, and I think that has weighed heavily on this industry’s mind," said Mike Sommers, API president and CEO.
The big picture: The oil and gas industry could see dozens, maybe hundreds, of bankruptcies in the coming months and years as the sector grapples with pandemic-fueled shutdowns choking oil demand, a recent analysis by consultancy Rystad Energy found.
- Even before the coronavirus crisis, many companies were doing poorly financially.
- Sommers indicated these firms should not get government support.
“We want to make sure if you were solvent going into this crisis and credit-worthy going into this crisis, you can survive this crisis. For some firms, that was not the case. I don’t think we’re interested in programs that would send good money after bad.” — Mike Sommers
The intrigue: Sommers, who represents the industry's largest trade group with more than 600 members, said broader emergency loan programs Congress has already created to help a range of troubled companies are sufficient for oil producers, too.
Most of the sector is opposed to special treatment given the longer-term political consequences, Sommers said.
- He shared a comment he said a CEO of one of API's members, a large independent oil and gas company, told him. "You can't ask for capitalism on the way up and then socialism on the way down," Sommers relayed.
- Sommers spoke to Axios as the White House prepared to offer details on a brewing aid plan aimed at smaller and medium-sized companies.
But, but, but: Not everyone in the industry agrees with API.
- Lee Fuller of the Independent Petroleum Association of America, which represents smaller and more U.S.-based producers, said his group would support a specific program if that’s what it would take.
- “We have a lot more companies in our membership that have been facing these struggles than perhaps API does,” Fuller said. “We’re trying to make sure they’re getting a fair shot.”
Flashback: Sommers recalled his time working on Capitol Hill during the government's response to the 2008-2009 recession, where a range of companies, including banks and automakers, received federal loans.
He referred to Jamie Dimon, CEO of JPMorgan Chase, which took $25 billion in recovery loans at the time.
- "Washington is littered with people who have taken these kinds of money from the federal government and most of the time they are still paying for that kind of government involvement," Sommers said.
- "Every time Jamie Dimon has to go to the Hill, he has to answer for that [Troubled Asset Relief Program] money he didn't want to take, that he was asked by the government to take," he said.