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The COVID-19 virus has shocked the globe in more ways than one. While world leaders work to mitigate the virus’s effects on their nation’s public health and economy, businesses across the globe, many of which have been ordered to close their doors are left wondering their fate. The effects of this pandemic are wide-ranging, affecting virtually everyone in the United States, and the energy industry is not immune.
The domestic natural gas industry was not in the best condition when faced with the new fight against coronavirus. Appalachia’s shale gas industry has declined sharply in past months due to oversupply and low prices, leaving major operators and others in the industry vulnerable to collapse even before the virus was brought to the States. Regional companies, such as Pittsburgh-based EQT, have laid-off workers and slowed production while global giants such as Chevron have pulled out of Appalachia altogether. Saudi Arabia’s recent dumping of cheap oil could benefit the gas industry at the expense of oil, but the shock of COVID-19 does nothing to help.
Southwestern Pennsylvania’s shale industry, once formidable, has begun to crumble under the declining price of gas, a national glut, and now even lower demand as millions of Americans resort to staying at home rather than going to work, school, or out to shop. This week, President Trump has floated various ideas to aid businesses fearing bankruptcy or closure including the elimination of payroll tax through the end of 2020. It is being reported that those close to the administration believe that the natural gas industry could be receiving specialized support in response to the virus as well.
According to the reports, the industry could be offered “low-interest government loans” to prevent total shutdowns. While this may help in the short term, it will likely do little to curb the pre-COVID struggles that the industry is experiencing. A combination of accessible loans and the elimination of payroll tax will most likely help the industry stay afloat for now, but should not be confused with a total bailout of the natural gas industry.
Unprecedented situations like the coronavirus pandemic unfortunately only bring continued uncertainty, as the financial markets continue to fall and there is no timetable on when the crisis may pass. Companies in the gas industry will certainly continue to cut spending while trying to maintain operations in this uncertain landscape.