Mike Sommers, the American Petroleum Institute's CEO and President, joined Yahoo Finance Live to discuss the recent volatility within the oil market and key issues impacting producers.
MYLES UDLAND: Back to the oil market, we're joined now by Mike Summers. He's the CEO and President of the American Petroleum Institute. So, Mike, I guess maybe just set it up for our viewers where the API sits kind of in the conversation right now around the oil and gas business and what your membership is really-- the pain they're feeling right now given what we've seen in the price of crude on the market.
MIKE SOMMERS: Yeah, Myles, great to be with you. I do think-- you know, to put this into perspective before the virus really hit, the world consumed about 100 million barrels of oil every single day. Right now based on our estimates, we're down anywhere from 20 million barrels a day off that to 25 million barrels a day. So when the world isn't consuming as much oil, prices, of course, are going to drop, because right now we're still producing throughout the world, around that 100 million barrels a day. So we have a huge problem just in terms of a tremendous glut worldwide of oil.
So the big concern right now is we've got to get demand back. And the only way we're going to get demand back, of course, is to get through this terrible pandemic. But once the economy comes back, demand is going to come back. People are going to start driving again. People are going to start flying again. And that demand will rebound.
MYLES UDLAND: And so comparing this episode for the energy markets to what we saw five, six years ago, '14 into '15, are there similarities? Are there differences? What are you guys hearing? And how are companies that you're in contact with thinking about getting through this period versus what we saw really linger for a couple of years late '14 all the way into 2016?
MIKE SOMMERS: Yeah. So we've never seen anything like this before. We've seen supply shocks before when there's not enough supply because of various issues, whether it's a hurricane or a war. We've seen demand shocks before. We have never seen them together at the same time.
The big concern that we're going to see right now, once we get to late April or even early May, is a storage shock because there's just simply not enough commercially available storage on the market right now for all of this oil that's on the market. So you have tankers floating in the ocean right now filled with oil. There were only 10 of those in February. There are almost 60 of those today, tankers filled with oil. And we're always looking for new storage that's commercially available right now.
So one of the things that we've been working on is working with the Department of Energy to make sure that there's new storage that's coming online. And we were pleased that the Department of Energy put some 30 million barrels of storage from the Strategic Petroleum Reserve online. And we're excited to hear that they're going to be doing more as well.
MELODY HAHM: Hey, Mike, Melody here. Just thinking about the regional impact, we know Texas has been successful in diversifying its sort of revenue streams, but when you look at the states of Wyoming, Alaska, Oklahoma, what are you hearing from a lot of your members and just the individuals who are losing jobs amid this crisis?
MIKE SOMMERS: Yeah. I mean, this is a terrible situation and, again, unlike anything that we have seen. So we're working with a number of our members to make sure that they have the liquidity that they need to get through this current crisis. So the Fed facility, the small business PPP program is certainly helpful. But I think everybody in this industry understands that until we get demand back, there's not going to be any relief.
This is an industry that believes in the free market. It believes in supply and demand as the best arbiter of price. So we're not asking for any extra help from the federal government. We're not interested in any bailouts, because we know what happens once that happens. It's that once you invite the government in, it's hard to get them out. So we want to make sure that this industry is there when we get through the pandemic. This is a resilient industry and we're confident that we will remain the world leader in energy production.
MYLES UDLAND: And Mike, I just want to finish with a question about something the public has heard a lot about, but I'm not sure how well understood it is which is the Strategic Petroleum Reserve, this idea that the government can buy up some of this oil and have it in case of a rainy day. Where does that fit into this conversation right now about expanding capacity? And how real of an element to the market maybe finding a certain clearing price is that at this time?
MIKE SOMMERS: Yeah. I mean, so when you think about it, there's only about 77 million barrels of space left under the current authorization for the Strategic Petroleum Reserve. That's about one day of consumption in the world. So that's not really going to help significantly within these markets. It does help on the margins though. And it would be a strategic advantage to the United States right now to purchase into the SPR for national security reasons, right? You're going to be buying a very historically low prices, of course. And then, you know, the federal government could actually make money because we know that these markets are eventually going to rebound once we get through the pandemic.
MYLES UDLAND: All right. Mike Sommers is the CEO and President of the American Petroleum Institute. Thanks for talking to us. Talk soon.
MIKE SOMMERS: Great to be with you.