Mnuchin Considers Lending Program for Oil Companies to Offset Effects of Pandemic, Supply Glut

Treasury Secretary Steven Mnuchin testifies before the Senate Finance Committee on Capitol Hill in Washington, D.C., February 12, 2020. (Yuri Gripas/Reuters)

Treasury Secretary Steve Mnuchin on Thursday announced he was considering creating a federal lending program for oil companies currently facing numerous challenges during the coronavirus pandemic.

“One of the components we’re looking at is providing a lending facility for the industry,” Mnuchin told Bloomberg. “We’re looking at a lot of different options, and we have not made any conclusions.”

The lending program would be run by the Federal Reserve, although certain oil producers can already obtain relief from other Fed programs.

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“Investment-grade companies will be able to either access the normal capital markets or will be able to access the Fed’s investment-grade facility,” Mnuchin said. However, he added, “for them to fit into a Fed facility, they would have to fit into the normal constraints.”

Mnuchin said he is discussing “alternative structures with banks” for companies that lack the credit required to access Fed loans. The Trump administration is also considering taking a financial stake in some companies in exchange for loans, and could ask some companies to limit production.

Oil prices worldwide have collapsed during the coronavirus pandemic, with decreased demand bringing U.S. crude prices below zero earlier this week. Producers were also hit by a price war between Russia and Saudi Arabia, both of which flooded the market with oil in March just as U.S. stocks crashed briefly into a bear market.

The U.S., Russia, and OPEC nations agreed last week to cut worldwide production by almost 10 million barrels per day, however even that measure was unable to stabilize oil prices.

Zachary Evans is a news writer for National Review Online. He is a veteran of the Israeli Defense Forces and a trained violist.

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