Trump's vision of $40 oil would be a disaster for Alaska
In the idiotic slogan sweepstakes, the Alaska Republican Party has a solid entry with “American oil from Alaskan soil,” facing stiff competition from “Energy Dominance,” “The Road to Energy Dominance Runs through Alaska” and “Drill Baby Drill.”
While ConocoPhillips and other giant oil companies say they expect to save a lot of money because of new tax provisions approved by Trump and the GOP Congress, the industry is alarmed that Trump keeps pushing for low prices.
“He has repeatedly told oil executives he wants oil under $40 a barrel, and executives have taken turns lobbying him against lower prices. ‘He thinks lower oil prices solve every problem—it’s a magic elixir,’ one oil executive said. ‘A lot of executives have told him it will actually lead to bankruptcies in the industry and lower production over time,’” the Wall Street Journal reported.
If Trump gets his wish of $40 oil, there won’t be much American oil from Alaskan soil. It will be an Alaska disaster.
Meanwhile, ConocoPhillips has announced plans to cut up to one quarter of its employees and the industry is dealing with the economic uncertainty that Trump leaves in his wake.
“In their March meeting with Trump, oil-and-gas executives lobbied for a carve-out for oil-field products from his 25% tariffs on steel and aluminum, but that didn’t happen,” the Journal said.
The latest survey of oil firms by the Dallas Federal Reserve includes comments from oil executives that should worry those who trust in idiotic slogans during this “Golden Age of Alaska.”
Here is the full survey of 139 companies in Texas and nearby states.
Here are some comments from industry insiders :
The ‘drill, baby, drill’ return isn't going to happen! Banks, shareholders, bondholders, C-suites, and everybody realizes the prior ‘drill, baby, drill’ boom led to financial disasters and wasted capital, natural resources and human resources. From now on, economic decisions will have to be prudent and well-founded in logic, not hyperbole.
We are finding it difficult to hedge production at this level. Our belief is crude at $60 per barrel is below replacement cost and will not continue unabated for an extended time. We may see oil drop to the mid $50 per barrel but it should be short lived. Big risk is economic uncertainty around the globe including high debt levels for the major economies, which may crack under higher interest rates and slowing growth. If they do crack, oil prices could drop precipitously for an extended period of time.
Day to day changes to energy policy is no way for us to win as a country. Investors (rightly) avoid investing in energy (of all types, now) because of the volatility of underlying business results as well as the "stroke of pen" risk that the federal government wields as it relates to long duration energy developments. Life is long, and the sword being wielded against the renewables industry right now will likely boomerang back in 3.5 years against traditional energy which will find itself facing harsher methane penalties, permitting restrictions, crazy environmental reviews and other lawfare tactics.
The administration is pushing for $40 per barrel crude oil, and with tariffs on foreign tubular goods, [input] prices are up, and drilling is going to disappear. The oil industry is once again going to lose valuable employees.
The noise and chaos is deafening! Who wants to make a business decision in this unstable environment?
The uncertainty from the administration’s policies has put a damper on all investment in the oil patch. Those who can are running for the exits.