Medical mask to prevent the spread of COVID-19

This Independence Day, as we consider all Americans that have served and given their lives for our country to be free, we have a lot to celebrate on the energy front. Not only are we the largest natural gas producer in the world, we now have become the largest oil producer. And the U.S. is the second largest growth market in the world for renewables. Last year on this day, I wrote that the only thing that can hold us back from our energy dominance is ensuring America has the necessary energy infrastructure to support our continued growth.

We never could have predicted how the Covid-19 Pandemic has turned our world upside down, especially in the bright spot that was American’s energy independence.

Many in the industry don’t believe U.S. production not ever reaching pre-pandemic levels of 12.7 million barrels per day.

A virus containment theme is the only course of action for recovery many leaders of the industry believe and this Independence Day can mark the real start for America to really stand up strong in the fight against the coronavirus fight.

In a recent survey of oil and gas executives by the Dallas Federal Reserve Bank, this became clear. Weak demand and overproduction are the sources of low prices that are hurting many firms. The second quarter is more negative than the first in terms of decreased activity, oil and gas production, and capital expenditures, both in the previous quarter and next year.

U.S. Oil Production & Rig Count
Business Indicators: E&P Firms

Having worked in and around the energy sector for over thirty years, the outlook is about as dark as during the days OPEC dumping oil in the 1980s. Two thirds of energy industry executives report a worsening outlook, with an increase in layoffs. Nearly 50% of firms applied for the Paycheck Protection Program.

OPEC, primarily Saudi Arabia, is cracking down on OPEC members to uphold production cuts, specifically Nigeria and Angola. The Saudis will reduce their own prices to make it happen. In order to raise price to a level of sustainability, the market needs proof that the OPEC pact will work. This is the best way to ensure less volatility in prices. The pandemic bring a new level of rebellion in OPEC, because many countries are extremely vulnerable to a loss of revenue.

The virus and its containment is the new leading economic indicator, which Goldman Sachs calculating the impact of mask wearing, a potential savings of 5% of GDP for the U.S. economy highlighted.

The industry needs the economy to function, jobs to return, and investments to matter. This only happens when we have progress on the virus’ decline like other countries. The world needs America to declare its independence from the control of this virus and truly do what is necessary to beat it like other countries. This is an opportunity to do a reset and all of us do better to take care of ourselves and of others. Wearing a mask is respectful of others and can help stop this virus. The energy industry understands this more than most.

Denise Bode
Bio Link Denise co-leads the federal practice at Michael Best Strategies with expertise in association and coalition management as well as development of public policy strategies, at both the state and federal level. She was active, on behalf of firm clients, during the recent federal tax reform debate, much as she was during the last major tax reform in 1986. Expertise: Regulatory Law, Tax & Trade, Energy, Environmental, Food, Agriculture, and Telecommunications

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