The Trump administration is considering paying U.S. companies to keep the oil they produce in the ground to help alleviate a historic glut.
The Energy Department is weighing a plan to purchase oil from small and medium-sized shale companies struggling from a price collapse on the condition that the producers don’t extract or deliver the oil, according to the Washington Examiner.
The could prop up struggling producers by giving them funding they need to pay their workers, while also keeping oil off the market at a time when global oil demand is expected to fall this year by a record amount due to the coronavirus halting economic activity and travel. Federal law provides the Energy Department authority to stock as much as 1 billion barrels of oil for emergencies. The Energy Department plan would pay companies to not produce as much as 365 million barrels worth of oil, Bloomberg reported, which then could be counted as part of the government’s emergency stockpile.
Bloomberg reported the law doesn’t dictate where the oil goes, meaning it doesn’t necessarily need to be stored in the nation’s emergency Strategic Petroleum Reserve. The government can instead ensure that the oil is not even extracted in the first place.