Trump administration to rent 23M barrels of storage space to oil companies amid falling prices

The Department of Energy (DOE) is moving ahead with its plan to rent storage capacity to struggling oil companies that are running out of space amid a steep drop in demand due to the coronavirus.

DOE is negotiating contracts with nine oil companies that want to use space in the nation’s Strategic Petroleum Reserve (SPR). The deal will use 23 million barrels of capacity in the 77 million barrel tanks.

“When producing oil you have two options — you either use it or you store it. With the impacts caused by the COVID-19 pandemic, we are seeing an enormous decrease in demand as our country works to contain the virus,” said U.S. Secretary of Energy Dan Brouillette.

“Providing our storage for these U.S. companies will help alleviate some of the stress on the American energy industry and its incredible workforce,” he said.

The administration’s efforts to fill the reserve comes as oil-producing countries have struck a deal to reduce global oil production by 10 million barrels a day, a roughly 10 percent cut in overall production.

However, experts say the production decline won’t be enough to offset the 30 percent drop in demand, leaving the administration eager to fill to reserve.

Companies will pay for the rental space in oil. That payment method was decided after Congress refused to supply the $3 billion the Trump administration requested to buy oil to fill up the reserve. 

President Trump had called it a commonsense move to buy oil at some of its lowest prices in decades to fill reserves.

But Democrats had repeatedly opposed any measure they said would prop up the fossil fuel industry, including buying oil for the SPR. 

“Using federal assistance — including low-interest loans, royalty relief, tax breaks, or strategic petroleum reserve purchases — in order to prop up oil companies would be a wasteful misuse of government resources that would exacerbate the climate crisis,” Sens. Ed Markey (D-Mass.), Jeff Merkley (D-Ore.) and Bernie Sanders (I-Vt.) wrote a letter to Trump in March.