“Take 2 Tax-Cuts, Rollback Regulations & Call Me In The Morning!” COVID-19 as excuse for profit

“We are in the midst of a crisis where people are literally having to skip work and may miss paychecks or face medical debt” because of coronavirus, said Robert Hockett, a professor at Cornell University who has advised Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) on economic policy. “The idea you would look to help out shale companies now is like something out of a satire or a bad movie. It’s absurd.”

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Partial predatory price behavior on the part of a Saudi-Russian “price war” appears more like WWE kayfabe that will alter the “competitive” structure of the fossil-fuel industry. The WH wants to give that industry unnecessary subsidies during a public health crisis in the guise of cheap vehicle fuel. How very Trumpian to prop up credit-short firms with “low-interest loans”. And then there’s those oil sanctions Trump will somehow cut.

The challenge of the spread of COVID-19 couldn’t have come at a worse time for OPEC plus Russia deliberations. OPEC members were already miffed at Russia by what they believed in retrospect to be a tricky request that Russia’s condensate production, a byproduct very similar to crude oil, not be counted in any production reduction agreement. Russia then increased its condensate output by 1.68 million barrels a day in the weeks following the December OPEC meeting. For its part, Russia is also frustrated with Saudi Arabia, which it feels has not reciprocated its cooperation over oil prices by forging stronger collaboration in other areas such as arms sales and co-investments in each other’s energy industry.

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Any drop in U.S. shale production as vulnerable companies lose access to capital could prove short-lived once oil prices recover and productive properties move to stronger players through market consolidation.

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Given the wide range of levels of financial leverage among industry players, increased tax breaks to industry might be less effective than other more direct measures to intervene to shore up credit markets. One such last resort approach could be special targeted lending facilities that allow lenders to distressed shale firms to gain liquidity by offloading some risk directly to the Treasury Department. 

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A question on energy policy should be presented to the debate in AZ between Biden and Sanders. This will be the moment for kumbaya, and the leadership test for both candidates. Because Fracking:

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— Jeffrey Stein (@JStein_WaPo) March 10, 2020

The White House is strongly considering pushing federal assistance for oil and natural gas producers hit by plummeting oil prices amid the coronavirus outbreak, as industry officials close to the administration clamor for help, according to four people familiar with internal deliberations.
President Trump has touted the growth of oil and natural gas production under his administration, celebrating their rise in politically crucial swing states such as Pennsylvania. But many oil and gas firms were hammered Monday by the price war that broke out between Saudi Arabia and Russia, driving oil prices down in their steepest one-day drop in almost 30 years.
White House officials are alarmed at the prospect that numerous shale companies, many of them deep in debt, could be driven out of business if the downturn in oil prices turns into a prolonged crisis for the industry. The federal assistance is likely to take the form of low-interest government loans to the shale companies, whose lines of credit to major financial institutions have been choked off, three people said.

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“We are in the midst of a crisis where people are literally having to skip work and may miss paychecks or face medical debt” because of coronavirus, said Robert Hockett, a professor at Cornell University who has advised Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) on economic policy. “The idea you would look to help out shale companies now is like something out of a satire or a bad movie. It’s absurd.”
Still, even some liberals suggested they may be able to support the idea. Jared Bernstein, who served as an economic adviser to then-Vice President Joe Biden, said the Obama administration propped up many firms with low-interest loans during the 2008 financial crisis and said such an idea may make sense.
“I have no problem with helping firms beset by what’s going on, particularly those taking a sharp cash flow hit,” Bernstein said. “I would just prefer to do a loan guarantee rather than a cash transfer bailout process we did with Wall Street.”

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— NYT National News (@NYTNational) March 11, 2020

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— Crooks and Liars (@crooksandliars) March 11, 2020

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