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Washington’s Reaction to Oil Price Drop

The ongoing crude price war between Saudi Arabia and Russia, as well as the COVID-19 coronavirus, have created havoc on the oil and gas industry worldwide. In the United States, Congress and the Administration have taken steps to help the industry weather this storm.

The President announced on March 13 that the Strategic Petroleum Reserve will be filled. Analysts believe there is capacity to inject 500,000 b/d over the course of six to 13 months.

Government actions being discussed

  • $1 trillion-dollar market stabilization package could be introduced as soon as this week.
  • Short- and long-term loan guarantees.
  • Loan guarantees for manufacturers having to re-tool due to supply disruptions.
  • Deferred tax payments of $1 million for individuals and $10 million for companies for 90 days without interest or penalty.
  • The White House has been applying direct pressure on Saudi Arabia and Russia to stop the oil price war given world events.
  • The White House is considering direct payments to Americans. Payments of $1,000 per person or up to $4,000 per family are being considered.
  • The Federal Reserve has triggered 13(3) emergency central bank support.  This emergency authorization could go up to as much as one trillion dollars.
  • Removing the prohibition on central bank purchasing stock directly. This would allow direct government investments in U.S. companies.
  • Many Senators are pushing for a suspension or pause on 232 and 301 tariffs. So far, the White House has pushed back on these ideas, but some on the Hill are pushing for language to be included in the bailout package to achieve this.
  • Infrastructure package similar to 2008 stimulus with named projects to be funded.

As details of the stabilization bill become finalized, PESA will provide additional details.

The House passed HR 6201 on March 13, which includes multiple provisions for short-term stabilization that may affect our industry:

  • A provision that provides employees of companies with fewer than 500 employees and government employees, who have been on the job for at least 30 days, with the right take up to 12 weeks of job-protected leave under the Family and Medical Leave Act to be used for any of the following reasons:
    • To adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus
    • To care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus
    • To care for a child of an employee if the child’s school or place of care has been closed, or the child-care provider is unavailable, due to  coronavirus. After the two weeks of paid leave, employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay.
  • The bill includes the Emergency Paid Sick Leave Act. This requires employers with fewer than 500 employees and government employees to provide employees two weeks of paid sick leave, paid at the employee’s regular rate, to quarantine or seek a diagnosis or preventive care for coronavirus; or paid at two-thirds the employee’s regular rate to care for a family member for such purposes or to care for a child whose school has closed, or child care provider is unavailable, due to the coronavirus.
  • Full-time employees are entitled to two weeks (80 hours) and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.
  • The bill ensures employees who work under a multi-employer collective agreement and whose employers pay into a multi-employer plan are provided with leave.
  • The bill provides a refundable tax credit equal to 100% of qualified paid sick leave wages paid by an employer for each calendar quarter.

The bill is waiting on Senate action.

Possible federal government actions expected in the near term include a full 14-day (or more) shutdown of country with travel limitations, as well as a full domestic travel ban for non-essential travel. The President has indicated this is not currently his plan, but it could be enacted should conditions worsen.