Texas Sen. Ted Cruz is asking the Federal Reserve for a government lending program that will provide emergency aid to small and mid-sized U.S. oil companies, which are struggling after oil prices plunged earlier this week.
In a letter addressed to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell, Cruz noted the need for “urgent action,” in the form of increased access to capital, to bail out small-and medium-sized businesses tied to the oil and gas industry.
On Monday, an unprecedented drop in crude oil prices left many Texas oil companies reeling. One barrel of West Texas Intermediate crude cost in the $60 range at the start of the year. It dropped into the negatives for the first time in history on Monday. Texas is the nation’s top oil-producing state, leading to many fears that existing economic woes from the shutdown will worsen. Already, unemployment claims in the state are at record highs.
The federal stimulus bill, known as the CARES Act, previously directed the Federal Reserve to provide relief to small and mid-sized businesses. But Cruz said the existing programs are not “sufficiently structured” to support oil companies, as they place restrictions on the size of possible loans depending on the size of a business’s pre-existing debt.
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“To survive, the oil and gas industry needs to be able to access short-term liquidity,” Cruz said in the letter. “Allowing the current government-created crises to dry up all liquidity will cripple our country’s domestic exploration and oil refining capabilities.”
According to Bloomberg News, Mnuchin had previously said he is considering a lending facility for oil companies, though they would still have to meet certain requirements. — Raga Justin