American shale producers have launched an aggressive lobbying campaign in support of new sanctions against Saudi Arabia and Russia, urging the White House to compel the oil producing nations to cut output in order to prop up crude prices. The industry has tapped Rick Perry, President Donald Trump’s recently-departed energy secretary, to help in the push, which has included advocating a block on Saudi crude shipments to North America’s biggest refinery.
Shale producers have faced an existential threat since demand collapsed amid the global coronavirus lockdown and a Saudi-Russian market-share war that drove crude prices down to $20 a barrel. Most shale producers are unprofitable at prices below $50 a barrel, and the bonds of some shale companies have sold off sharply as investors anticipate widespread bankruptcies in the sector.
Mr Trump came to the aid of shale producers on Thursday by talking up a potential production cut deal between Moscow and Riyadh, which sent crude prices up more than 20 percent. But the Kremlin has denied any agreement is in the works. The shale push comes despite resistance from the oil industry’s most powerful lobbying organisation, the American Petroleum Institute, which represents the largest energy groups and opposes any controls on supply.
Among the shale industry proposals are preventing Saudi crude from reaching the kingdom’s large Motiva refinery in Port Arthur, Texas; tariffs on foreign oil; or suspending the Jones Act, which helps make crude shipped by domestic suppliers more expensive than oil delivered on foreign tankers . “The idea that is gaining the most traction is to target Motiva,” the largest refinery in North America, said an executive at a shale producer.
Shale producers are also urging the White House to consider suspending US military aid to Saudi Arabia and imposing further sanctions on Russian energy – or lifting existing ones if the Kremlin co-operates. The US recently imposed sanctions on a trading unit of Rosneft, Russia’s state-controlled energy company.
Mr Trump is due to meet oil industry executives on Friday, where the president is scheduled to discuss strategies if Saudi Arabia and Russia fail quickly to agree to cut supply.