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| ‘I’m Just Living a Nightmare’: Oil Industry Braces for Devastation | ‘I’m Just Living a Nightmare’: Oil Industry Braces for Devastation |
| (3 days later) | |
| HOUSTON — Workers at Marathon Petroleum’s refinery in Gallup, N.M., are turning off the valves. Oil companies in West Texas are paying early termination fees to contract employees rather than drill new wells. And in Montana, producers are shutting down wells and slashing salaries and benefits. | HOUSTON — Workers at Marathon Petroleum’s refinery in Gallup, N.M., are turning off the valves. Oil companies in West Texas are paying early termination fees to contract employees rather than drill new wells. And in Montana, producers are shutting down wells and slashing salaries and benefits. |
| Just a few months ago, the American oil industry was triumphant in its quest for energy independence, having turned the United States into the world’s biggest petroleum producer for the first time in decades. But that exhilaration has given way to despair as the coronavirus has kneecapped the economy, destroying demand for gasoline, diesel and jet fuel as cars sit parked in driveways and planes are consigned to remote fields and runways. | Just a few months ago, the American oil industry was triumphant in its quest for energy independence, having turned the United States into the world’s biggest petroleum producer for the first time in decades. But that exhilaration has given way to despair as the coronavirus has kneecapped the economy, destroying demand for gasoline, diesel and jet fuel as cars sit parked in driveways and planes are consigned to remote fields and runways. |
| The oil industry has lived through many booms and busts, but never before have prices collapsed as they have this week. On Monday, one closely watched price fell below zero, meaning some traders had to pay others to take crude oil off their hands. That price — for May delivery — recovered on Tuesday, but not nearly to levels where oil companies can make a profit. At the same time, the price of oil for June delivery fell by about half to roughly $10 a barrel. | The oil industry has lived through many booms and busts, but never before have prices collapsed as they have this week. On Monday, one closely watched price fell below zero, meaning some traders had to pay others to take crude oil off their hands. That price — for May delivery — recovered on Tuesday, but not nearly to levels where oil companies can make a profit. At the same time, the price of oil for June delivery fell by about half to roughly $10 a barrel. |
| “I’m just living a nightmare,” said Ben Sheppard, president of the Permian Basin Petroleum Association, which represents companies in the area of Texas and New Mexico that became the world’s most productive oil field last year. | “I’m just living a nightmare,” said Ben Sheppard, president of the Permian Basin Petroleum Association, which represents companies in the area of Texas and New Mexico that became the world’s most productive oil field last year. |
| In Midland, Texas, the epicenter of the oil shale boom over the last decade, parking lots at companies like Chevron, Diamondback and Apache are empty aside from a scattering of pumping trucks. Executives are working from home, huddling with their colleagues and board members to decide how quickly to shut down production and lay off workers. Oil giants like Exxon Mobil have slashed their 2020 exploration and production budgets by nearly a third, and that was before the total oil price collapse at the start of this week. | In Midland, Texas, the epicenter of the oil shale boom over the last decade, parking lots at companies like Chevron, Diamondback and Apache are empty aside from a scattering of pumping trucks. Executives are working from home, huddling with their colleagues and board members to decide how quickly to shut down production and lay off workers. Oil giants like Exxon Mobil have slashed their 2020 exploration and production budgets by nearly a third, and that was before the total oil price collapse at the start of this week. |
| Many smaller oil companies are expected to seek bankruptcy protection in the coming months after having spent years borrowing billions of dollars to extract and move crude. Production companies have $86 billion in debt coming due between 2020 and 2024, and pipeline companies have an additional $123 billion they have to repay or refinance over the same period, according to Moody’s Investors Service. | Many smaller oil companies are expected to seek bankruptcy protection in the coming months after having spent years borrowing billions of dollars to extract and move crude. Production companies have $86 billion in debt coming due between 2020 and 2024, and pipeline companies have an additional $123 billion they have to repay or refinance over the same period, according to Moody’s Investors Service. |
| “We are worried that the current disorderly market has adversely damaged the industry,” said Ben Luckock, co-head of oil trading at Trafigura, a large exporter of American crude. “In the short term some form of government assistance is likely needed because the price levels we are currently transacting at are unsustainable for U.S. producers.” | “We are worried that the current disorderly market has adversely damaged the industry,” said Ben Luckock, co-head of oil trading at Trafigura, a large exporter of American crude. “In the short term some form of government assistance is likely needed because the price levels we are currently transacting at are unsustainable for U.S. producers.” |
| The reverberations to other industries could be significant. A decade or two ago, low oil prices would serve to bolster the American economy by reducing energy costs. But the oil industry has become so big and important — it directly and indirectly employs 10 million people — that its problems will deal a blow to many kinds of businesses, including manufacturers that build its equipment, steel companies that make its pipes and banks and hedge funds that lend it money. | The reverberations to other industries could be significant. A decade or two ago, low oil prices would serve to bolster the American economy by reducing energy costs. But the oil industry has become so big and important — it directly and indirectly employs 10 million people — that its problems will deal a blow to many kinds of businesses, including manufacturers that build its equipment, steel companies that make its pipes and banks and hedge funds that lend it money. |
| President Trump has said that he stands ready to help U.S. oil and gas businesses, a position he reiterated on Tuesday. But the policies he and other administration officials have proposed — imposing tariffs on foreign oil or filling the Strategic Petroleum Reserve — would do so little that their impact would amount to a rounding error. | President Trump has said that he stands ready to help U.S. oil and gas businesses, a position he reiterated on Tuesday. But the policies he and other administration officials have proposed — imposing tariffs on foreign oil or filling the Strategic Petroleum Reserve — would do so little that their impact would amount to a rounding error. |
| Simply put, the global oil industry is producing vastly more oil than the world needs — about 30 million barrels a day too much. Even if the federal government started buying oil for the reserve immediately, it could absorb only half a million barrels a day, or less than 2 percent of the excess world production. | Simply put, the global oil industry is producing vastly more oil than the world needs — about 30 million barrels a day too much. Even if the federal government started buying oil for the reserve immediately, it could absorb only half a million barrels a day, or less than 2 percent of the excess world production. |
| Some industry executives had pinned their hopes on the Texas Railroad Commission, asking it to exercise a power it has not used since 1973 to force oil companies in the state to cut production. But the commission, which regulates the industry there, declined to do so at a meeting held by videoconference on Tuesday, with two of its three commissioners saying that they needed more legal advice before making a decision. | Some industry executives had pinned their hopes on the Texas Railroad Commission, asking it to exercise a power it has not used since 1973 to force oil companies in the state to cut production. But the commission, which regulates the industry there, declined to do so at a meeting held by videoconference on Tuesday, with two of its three commissioners saying that they needed more legal advice before making a decision. |
| All the while, the glut of oil keeps growing. And refineries, storage tank hubs and pipelines are quickly filling to the brim, while ocean tankers carrying as much as 300 million barrels of oil are floating or sailing figure-eights waiting for buyers. | All the while, the glut of oil keeps growing. And refineries, storage tank hubs and pipelines are quickly filling to the brim, while ocean tankers carrying as much as 300 million barrels of oil are floating or sailing figure-eights waiting for buyers. |
| The tanker operators, who can make more than $100,000 a day for spot charters of their ships, may be the only ones making money right now. | The tanker operators, who can make more than $100,000 a day for spot charters of their ships, may be the only ones making money right now. |
| Mr. Trump’s biggest service to the industry was to help push Saudi Arabia, Russia and other producers to reach a deal on April 12 to cut 9.7 million barrels of daily oil output. But oil prices fell sharply after that agreement as traders realized its inadequacy. It also doesn’t help that the pact won’t even go into effect until May 1. | Mr. Trump’s biggest service to the industry was to help push Saudi Arabia, Russia and other producers to reach a deal on April 12 to cut 9.7 million barrels of daily oil output. But oil prices fell sharply after that agreement as traders realized its inadequacy. It also doesn’t help that the pact won’t even go into effect until May 1. |
| With 73 employees, Texland Petroleum, a producer in the Permian Basin that has 1,211 wells, is typical of hundreds of independent companies that represent the backbone of the industry, especially in rural areas of Texas, Oklahoma, Louisiana and North Dakota. In business since 1973, it has survived several downturns but always managed to sell its oil at prices that allowed it to at least break even. | With 73 employees, Texland Petroleum, a producer in the Permian Basin that has 1,211 wells, is typical of hundreds of independent companies that represent the backbone of the industry, especially in rural areas of Texas, Oklahoma, Louisiana and North Dakota. In business since 1973, it has survived several downturns but always managed to sell its oil at prices that allowed it to at least break even. |
| That is not true anymore. At least four customers have canceled purchases in recent days. One customer canceled contracts effective May 1 for 2,000 barrels a day, nearly 30 percent of the company’s output. | That is not true anymore. At least four customers have canceled purchases in recent days. One customer canceled contracts effective May 1 for 2,000 barrels a day, nearly 30 percent of the company’s output. |
| “It’s a sad time for our business, that’s for damn sure,” said Jim Wilkes, president of Texland. “The future is very cloudy right now because the pricing is below our production costs.” | “It’s a sad time for our business, that’s for damn sure,” said Jim Wilkes, president of Texland. “The future is very cloudy right now because the pricing is below our production costs.” |
| Mr. Wilkes has decided to shut all production and end all sales on May 1. Shutting wells is an expensive, laborious process, he explained, with workers obliged to treat well casings with chemicals so they do not corrode once oil stops flowing. And there is no guarantee that a shuttered well can be restarted and be made to pump out as much oil as it did earlier. | Mr. Wilkes has decided to shut all production and end all sales on May 1. Shutting wells is an expensive, laborious process, he explained, with workers obliged to treat well casings with chemicals so they do not corrode once oil stops flowing. And there is no guarantee that a shuttered well can be restarted and be made to pump out as much oil as it did earlier. |
| Mr. Wilkes said he was not planning to fire anyone, at least not now, because he took a Small Business Administration loan to pay his workers for two months, at which point the loan will be forgiven. But he is not sure what he will do after that. | Mr. Wilkes said he was not planning to fire anyone, at least not now, because he took a Small Business Administration loan to pay his workers for two months, at which point the loan will be forgiven. But he is not sure what he will do after that. |
| Updated July 7, 2020 | |
| The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization. | |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. | Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. |
| A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. | A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. |
| The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. | The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. |
| The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. | The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| “April is going to be terrible, but May is going to be impossible,” he said. | “April is going to be terrible, but May is going to be impossible,” he said. |
| Montalban Oil & Gas Operations, a company with 200 wells in Montana, is planning to shut all of its wells in 10 days when its executives expect to run out of storage space. It has slashed its payroll by 25 percent, and its president, Patrick Montalban, and other senior executives have taken a 50 percent pay cut. | Montalban Oil & Gas Operations, a company with 200 wells in Montana, is planning to shut all of its wells in 10 days when its executives expect to run out of storage space. It has slashed its payroll by 25 percent, and its president, Patrick Montalban, and other senior executives have taken a 50 percent pay cut. |
| Aside from worrying about the future, Mr. Montalban said he had been stocking up on $6 bottles of chardonnay, his drink of choice. | Aside from worrying about the future, Mr. Montalban said he had been stocking up on $6 bottles of chardonnay, his drink of choice. |
| “It’s a bloodbath out there; can you imagine minus $37 a barrel?” he said, referring to the price oil fell to on Monday. “There is something wrong with that market. It’s ridiculous.” | “It’s a bloodbath out there; can you imagine minus $37 a barrel?” he said, referring to the price oil fell to on Monday. “There is something wrong with that market. It’s ridiculous.” |
| Oil companies generally employ service companies to do their drilling and fracking, and so the downturn is particularly painful for those businesses — Halliburton, Baker Hughes and Schlumberger. Service companies have slashed payrolls and budgets in recent weeks, as have the thousands of smaller contractors that take care of things like cleaning spills, seismic testing and supplying trucks. | Oil companies generally employ service companies to do their drilling and fracking, and so the downturn is particularly painful for those businesses — Halliburton, Baker Hughes and Schlumberger. Service companies have slashed payrolls and budgets in recent weeks, as have the thousands of smaller contractors that take care of things like cleaning spills, seismic testing and supplying trucks. |
| Offshore drillers, which had done a brisk business over the last three years, have gone into a tailspin, with delays in investment decisions and canceled rig contracts. Diamond Offshore missed an interest payment on its debts last week and has hired legal and financial advisers for a potential restructuring. | Offshore drillers, which had done a brisk business over the last three years, have gone into a tailspin, with delays in investment decisions and canceled rig contracts. Diamond Offshore missed an interest payment on its debts last week and has hired legal and financial advisers for a potential restructuring. |
| Latshaw Drilling, a company active in Texas and Oklahoma, has laid off 300 of its 500 employees over the last six weeks. It is operating six of its 41 rigs and dropping an additional rig next week. Trent Latshaw, the company president, said he was confident the industry would eventually come back after the virus is tamed. | Latshaw Drilling, a company active in Texas and Oklahoma, has laid off 300 of its 500 employees over the last six weeks. It is operating six of its 41 rigs and dropping an additional rig next week. Trent Latshaw, the company president, said he was confident the industry would eventually come back after the virus is tamed. |
| “If for some reason Latshaw Drilling doesn’t make it through this,” Mr. Latshaw said, “the good Lord has something else planned for me.” | “If for some reason Latshaw Drilling doesn’t make it through this,” Mr. Latshaw said, “the good Lord has something else planned for me.” |