A conversation with Alexander C. Kaufman
The HuffPost reporter talks Big Oil and climate as COVID-19 rages on.
|EXXONKNEWS||Mar 27|| 4|
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I hope this finds you safe, healthy, and as sane as possible at this time. I, for one, have already cut my own bangs (I don’t listen) and made arrangements to adopt a newborn kitten. Will these decisions haunt me at some future date? I can only look forward to that point.
As mentioned over the past couple of weeks, there have been rumblings of a bailout for the fossil fuel industry in light of economic disruptions caused by the coronavirus pandemic — quite fitting in the background of debate over whether to sacrifice thousands of human lives to boost the economy. On Tuesday evening I called up Alexander Kaufman, a senior climate reporter at the Huffington Post, for his take. At that point, the Senate was still negotiating the stimulus package that it passed on Wednesday. The House is expected to vote today.
I’ll note that while the outlook for Big Oil has changed since we spoke, a bailout or financial break for the industry is still well within the realm of possibility as the COVID-19 situation develops. Here’s what he had to say about that and the forecast for fossil fuels as a whole.
A Kaufman in the wild.
As a reporter who covers climate change, how are you approaching your beat during the pandemic?
When this began to unfold I started covering the fallout of the steep drop in the price of oil, of the risk that was posed to the energy sector overall, and of the Trump administration’s desire to potentially bail out some of those companies. As the pandemic started to really hit critical mass [in the U.S.] about two weeks ago and we all started isolating from home, each of us on my team took on mini-beats that we would specialize in throughout the duration of the pandemic. So having written a few stories early on about access to utilities and being generally interested in utilities and utility policy, I adopted that. I just filed a story before we hopped on the phone about some of the holes in the policies that have been announced to stop service shutoffs for non-payment throughout the duration of this crisis.
How are you thinking about the intersections between the pandemic and the climate crisis?
It’s impossible to ignore, right? COVID-19 feels in many ways like a microcosm of climate change but sped up rapidly, where the titans of industry and their political allies downplayed the risks early on in order to keep commerce and economic activity going — and as a result of that, we failed to gain control over the outbreak pretty quickly. And the effects are disastrous — economically, to peoples’ lives — and we are woefully unprepared and fundamentally, constitutionally incapable of responding to it along the parameters of political debate in the U.S. as it has existed.
I saw a great line in an essay a week or so ago by Alex Pareene in the New Republic that was playing off the kind of libertarians in foxholes idea, where he quoted Ronald Reagan in the 80s saying “there’s nothing more frightening than the sentence ‘I’m from the government and I’m here to help.’” And he juxtaposed that with a sentence that came out of somebody from this administration essentially saying “you know, we had expected the private sector to respond by now.” I think that sums it up pretty nicely and sums up the crisis we’re facing with climate change as well.
Can you tell us about the potential for a fossil fuel industry bailout and what’s been proposed so far?
You know, a lot of the U.S. oil industry is very badly in debt. The fracking industry in general expanded largely off of cheap loans from Wall Street, and was struggling to pay off those debts with oil prices hovering between $50 and $60 a barrel. Now they’ve dropped to a third of that. So it’s impossible for them to make money, and it’s largely expected that there will be a lot of bankruptcies that come out of this should oil prices remain as low as they are. I should say that the drop in the price of oil is kind of a multifaceted thing [you can read more about that here].
As far as the bailout, at the time it was being discussed that the Trump administration would provide a bailout along the lines of what is being considered in Congress right now for airlines and other industries that are hurt by this downturn. That could come in the form of low interest loans, or other kinds of direct financial support from the federal government. What has happened since then is the Energy Department began buying up billions upon billions of barrels for the Strategic Petroleum Reserve, which is kind of a way for the administration to provide some additional demand. The sheer market capitalist perspective on this would be that this is a good opportunity for there to be some overdue market consolidation wherein the Chevrons or the Exxons of the world buy up the smaller companies that can’t pay their bills.
Analysts that I’ve talked to say that even in this kind of nightmare scenario for oil producers, where the price of oil is as low as $11 per barrel, the Chevrons and the Exxons are definitely taking a beating, and their stock price illustrates that, but they are in no danger of going bankrupt or being driven out of the market. At least not by this alone.
What could all of this mean for the climate?
It’s hard to say. In the near term, in all likelihood the low price of oil could lead to cuts in oil production. Generally speaking, the global economic slowdown has led to a reduction in fossil fuel use and emissions that result from it. That being said, shutting down the economy and keeping people indoors is not a long-term solution and is not decarbonizing. I think a lot of what happens next could be determined by the kind of bailout bill that is ultimately passed in Congress and what kinds of provisions would be included in it.
[The bill that the Senate passed Wednesday did not include the $3 billion provision that Trump and Republicans had sought to offset diminished demand for oil. But it also lacks many of the pro-climate policies Democrats were pushing for, including conditions that would’ve required airlines to cut carbon emissions and an extension of federal tax credits for renewable energy.]
I think it would be overstating the reality of the situation right now to say that the precipitous drop in the price of oil right now or a green stimulus response is going to directly lead to the end of the oil age. That said, I do think there is a high possibility that this crisis will result in a lot of political change and certainly already seems to be stoking peoples’ anger at the political system today, so it’s easy to see how down the line this may ultimately lead or help to fuel the political movements pushing for decarbonization in a big way.
Fossil fuel industry workers could be impacted by the financial fallout of the coronavirus epidemic. Would a bailout help them?
It depends on what form it takes and what requirements are made of companies that are receiving money. In the U.K. for example, the government is paying up to 80% of peoples’ salaries for companies that are keeping those workers on the payroll as a way of keeping them employed. That’s also something that Democrats and some other progressives here are pushing. Last week I interviewed Sara Nelson who was the head of the Association of Flight Attendants and is a powerful union leader, and she was saying, “Look, we don’t have to recreate an entire human resources department within the federal government to oversee the checks that people are getting. We can give companies money so that people can continue to keep their jobs, and once this crisis is over can go back to work and not have to find a new job.”
[As reported by Zach Carter of the Huffington Post, the Senate-approved bill “permits bailed out companies to lay off up to 10% of their workforce over the next six months, with no restrictions thereafter.”]
You wrote that "Before Trump took office, the industry took in the lion’s share of the $20 billion in federal and state subsidies given each year to fossil fuel companies, a report by the nonprofit Oil Change U.S. found." Doesn’t that mean we’re basically already bailing out Big Oil every year?
It depends on your definition of the term “bailout,” but are we already subsidizing them with the money that we pay in taxes? Absolutely. That has been a real lightning rod over the past couple of years as the Green New Deal and the movement around it has propelled climate change into the mainstream urgent political discourse. We are certainly already providing ample public resources to these companies.
I always like to think, particularly as a climate reporter, of resources and public goods as more than just money that people pay in taxes. These companies are allowed to drill on public lands, increasingly under the Trump administration. Those public lands are ours just as much as the money that we give, so that to me is yet another form of support that we pay for. The very fact that there is no price on carbon emissions and that they can just pump this shit into the air as much as they want — that is our public air that we are giving to them, and that allows them to completely write off an entire potential cost of doing business. So while I think it’s helpful to think of the subsidies that are given in those same terms, I think it goes well beyond that, and the public resources that they depend on to stay afloat as an industry are so much wider reaching than even the subsidy debate lets on.
Some people have called for nationalizing the oil industry. How serious is this proposal?
This idea has been around for a long time, and the thought has generally been that if the U.S. were to want to shut down the Exxons and the Chevrons and the other big companies that have been such a cancer on climate policy discourse, and generally on public understanding of this global crisis that we face, that one way to do it would be to bring those companies under the control of the government. That way, they are no longer responsible for delivering dividends to shareholders and are instead responsible to the public. Their ample resources and expertise, their supplies and employees could be mobilized instead to dismantle their operations and perhaps transform them into more sustainable energy producers.
The reason this idea has resurfaced now is that with oil companies and their stocks where they are as a result of the drop in the price of oil, it’s never been cheaper for the federal government to do it. Doing that at the moment would probably be a fraction of the annual defense budget for the federal government. Unless you’re ideologically opposed to the idea, I don’t see how you could remove that policy option from discussion when we’re talking about how we deal with this other enormous crisis that we face, and when we’re talking about the toxic effect that the industries in question have had on the general political discourse around this issue.
Is there anything I haven't asked you about that you think is important for our readers to know?
Yeah. You haven’t asked me what the hell I’m doing to entertain myself throughout my self-quarantine. In the evenings I have been watching episode after episode of The Sopranos for the first time. It is as good of a show as everybody says. It’s a little bit unsettling for me as somebody who grew up on Long Island, so not totally dissimilar from New Jersey, in a very Italian neighborhood, in that same era where the show is set… the cars, the accents, the ostentatious pride in Italian heritage and the general architecture is very familiar to me and has certainly added to the whole Italian theme of this phenomenon, between watching the news coming out of Italy, and I guess eating a lot of pasta, and also watching as everybody falls in love with our certainly forceful governor, Andrew Cuomo, and his fights with his brother. So yeah. ✨🍝
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Stay well. Until next time.