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US Authorities May Start Paying Oil Companies To Abandon Production

US Authorities May Start Paying Oil Companies To Abandon Production

Donald Trump's administration is studying the possibility of paying compensation to American producers who leave the oil in the bowels of the earth to avoid an oversupply in the market, which led to a fall in prices and caused the bankruptcy of some drilling companies, Bloomberg writes, citing sources.

According to senior representatives of the US administration, the corresponding plan was developed by the United States Department of Energy and it is designed for 365 million barrels of oil. The Ministry offers to "convert unused oil into reserves of the US government in the event of an emergency."

Currently, US legislation allows the Ministry of energy to reserve up to 1 billion barrels of oil in the event of an emergency without any restrictions. This creates a legal opportunity to store oil outside the state reserve and block its production. In fact, the government buys underground oil, asking producers not to produce it.

The implementation of the plan may require billions of dollars of appropriations from Congress, which recently refused the presidential administration to allocate $3 billion to buy oil for the strategic reserve, Bloomberg said.

This morning, US WTI crude futures fell below $20 per barrel for the first time in 18 years, Bloomberg notes.

On April 3, Trump asked Energy Secretary Rick Perry "where else can I store oil" and how to increase the state reserve. According to sources, the Agency is also studying the possibility of storing oil in floating tankers, unused oil refinery tanks and underground salt caves.