Mar 16, 2020 - Energy & Environment

The hurdles facing Trump's planned strategic oil purchase

Photo: Doug Mills-Pool/Getty Images

The first White House coronavirus policy response aimed specifically at the reeling U.S. oil sector may not be a sure thing to occur as President Trump envisions.

What's happening: Late Friday afternoon Trump said the U.S. would purchase enough crude oil to fill the Strategic Petroleum Reserve "right up to the top," which would ultimately be a $2.6 billion purchase if oil remained at Friday's prices.

  • That would involve a plan to purchase 78 million barrels, given that the reserve has a capacity of 713.5 million barrels and currently holds around 635 million.

Where it stands: The Energy Department said Friday it would "immediately initiate an expedited process" to begin purchasing oil.

But, but, but: The research firm ClearView Energy Partners notes that "funding remains unclear" and sees "political headwinds" in Congress to appropriating new money.

  • However, their weekend note added that the administration could gain congressional permission to reallocate existing funds for some of the purchases. S&P Global Platts has more on that here.

What they're saying: Oil analyst Bob McNally, president of Rapidan Energy Group, tells the Washington Post that buying oil at low prices for the stockpile is a good idea.

  • McNally, a former energy official in the President George W. Bush era, notes that "our economy remains vulnerable to supply disruptions anywhere in the world."

Go deeper: Trump to buy oil for nation’s strategic reserves

Go deeper

Trump to buy oil for nation’s strategic reserves

President Trump. Photo: The Washington Post / Contributor

President Trump will direct the Energy Department to buy oil for the nation’s strategic stockpile to boost prices and help the oil industry reeling after the market’s historic collapse this week.

The big picture: America’s Strategic Petroleum Reserve was created in the 1970s to ensure the U.S. has oil in case of an emergency. Today, Trump is buying oil for the reserve because of an emergency.

The fallout from oil's collapse

Data: Yahoo Finance; Chart: Axios Visuals

ExxonMobil, citing an "unprecedented environment," said last night that it plans to "significantly" cut spending in light of the coronavirus and the collapse in oil prices.

Why it matters: The oil giant's announcement is the latest sign of how deeply the upended market is affecting the sector.

Trump tiptoes toward oil engagement

Illustration: Eniola Odetunde/Axios

The potential for new U.S. responses to the oil price collapse has seemingly grown — enough to send prices back upward, even though it's all inchoate and fluid right now.

Driving the news: President Trump says he's eyeing some kind of intervention in the oil price war between Russia and Saudi Arabia, telling reporters yesterday that he would get involved "at the appropriate time."