Senators from top U.S. oil producing states have written a letter to President Trump asking he make big banks lend more money to troubled fossil fuel companies, many of whom face mounting debt if not bankruptcy after their access to credit decreased due to investors’ increasing perception of real risks from fossil fuels.
With “American energy dominance” the purported pillar of Trump’s economic and foreign policy platform—and the fossil fuels industry being the foremost funder to his campaign coffers—Trump has a self-interest in bailing out one of his biggest donor bases.
Signed by 14 Senators and 22 Representatives, the letter signals that fossil fuels executives are seriously concerned climate campaigners have convinced capital holders that oil, gas, and coal pose real risks, prompting investors to practice financial distancing from fossil fuels.
Members of Congress from Alaska, Texas, Oklahoma, North Dakota, Montana, Wyoming, Colorado, Louisiana, West Virginia, et.al., wrote that, “we find it illogical and unacceptable that they openly discriminate against the American energy sector.“
The letter fails to recognize that US shale oil companies faced major debt problems and fewer workers even before the COVID-19 pandemic. Even though Trump lowered production costs by rolling back environmental regulations, fast-tracking infrastructure, and bullying China and Europe to expand U.S. energy exports, oil companies’ borrowing binges from last few years made investors wary as companies’ balance sheets bled cash and made measly profits.
COVID-19 has since caused a dramatic drop in oil demand, worsened by Saudi and Russian producers increasing oil output, triggering an epic collapse in oil prices. U.S. oil producers kept pumping despite the global glut, sending some oil prices down into negative territory.
Now that oil prices look like they will stay lower for longer than anyone ever expected, access to credit is drying up as investors freeze out companies with heavy debt loads. Reuters recently reported that one-third of US shale oil companies could go bankrupt.
Senators specifically name the world’s largest asset manager, Blackrock, who has been the target of climate campaigners. “Considering BlackRock’s central role as a Federal Reserve fiduciary for the distribution of CARES Act credit facilities, its hostility towards the American energy sector is unacceptable and should be closely scrutinized.“
Still, it is not clear exactly what they want Trump to do. The letter ends by exacting quite ambiguous actions, although it appears to suggest that Trump condition banks’ access to federal funds in exchange for financing fossil fuels:
“We urge you and your Administration to use every administrative and regulatory tool at your disposal to prevent America’s financial institutions from discriminating against America’s energy sector while they simultaneously enjoy the benefits of federal government programs. Wall Street’s big banks, for example, should not be able to reap the benefits of participating in federally guaranteed loan programs laid out in the CARES Act, such as the Paycheck Protection Program or the trillion dollar 13(3) Federal Reserve facility lending programs, while simultaneously targeting American energy companies and workers, which again will be critical to our nation’s economic recovery and play such an important role in advancing our nation’s economic and national security.“
There may be no legal way to force private investors to lend to fossil fuels, especially companies selling crashing coal and shaky shale oil. Of course, that may be why these sectors are desperate for bailouts from public funds.