Protect Domestic Oil and Gas Producers from the Oil Price War

Saudi Arabia is a strategic ally but their actions threaten our security.

The Saudis and the Russians have joined forces in yet another effort to knock the United States out of the #1 position as petroleum producer. To do this, they are taking advantage of the inevitable weakening of demand because of the COVID-19 pandemic to magnify the impact of their supply increases.

What the world markets need in a time of crisis is stability, yet the Russians and Saudis seem hell-bent on kicking us while we are down.

What can we do about this?

• Maximize diplomatic efforts to convince the Saudis and Russians that price stability is what is most important right now.
• Leverage the strategic relationship to put pressure on the Saudi leadership.
• Ban the import of any foreign crude until the crisis has resolved, except for Canadian crude.
• Use a portion of the federal excise tax to create a subsidy for domestic producers to help them weather the storm. For example, a $5 per barrel subsidy would only cost $1.9B per month and would be more than sufficient to keep domestic producers afloat.
• Add to the U.S. Strategic Petroleum Reserves, to include the addition of new storage capacity if needed.

The world is at risk of shifting into a deflationary spiral which could be very destructive to wealth and to the debt that this wealth back-stops. Therefore, efforts must be made to stabilize markets while we work our way through the curent health crisis.