U.S. Energy Department to buy an initial 30 million barrels of oil amid coronavirus outbreak

The Department of Energy is set to purchase 77 million barrels of crude oil overtime to fill the the U.S. Strategic Petroleum Reserve. United States Secretary of Energy Dan Brouillette joins Yahoo Finance’s On The Move panel to weigh in.

Video Transcript

- One thing, though-- oil. West Texas Intermediate has actually been falling this morning. It's trading at around $23.90 a barrel, give or take a bit. And this comes on news that the Department of Energy plans to fill the Strategic Petroleum Reserve with a purchase of-- when it's all said and done-- 77 million barrels of American-made crude oil. Now, this is at the direction of President Trump. But joining us now on Yahoo Finance is Secretary of Energy Dan Brouillette. Thank you so much for being here. The first purchases will be 30 million barrels. Who will supply this oil?

DAN BROUILLETTE: Thank you, guys. It's a great opportunity to be with you. I appreciate the chance to talk to you this morning about the announcements we made yesterday. What we're doing is we're going to market with the first solicitations to purchase US origin, US-produced oil, as you said earlier, to fill the Strategic Petroleum Reserve.

The way we do that is through an auction market. So what you will see is that once Congress has funded this opportunity, about two weeks later, you will see an auction market. And folks will participate in that auction to supply the oil to the reserve.

- I believe Julie Hyman has a question for you, secretary, about where we go with the oil purchases as we watch oil prices fall.

DAN BROUILLETTE: Sure. Hi, Julie.

JULIE HYMAN: Hi, Mr. Secretary. Thank you for joining us. So I guess once we filled the SPR, what then? Right? I mean, we talk a lot here on the show about the Federal Reserve, and how many different tools they have, and whether they're running out of tools. What more tools does the Energy Department have at its disposal once this is done?

DAN BROUILLETTE: Sure. Well, it's important to recognize that we have a free market here in the United States. And the government itself, the US Department of Energy in particular-- we're not in the business, if you will, of manipulating the markets, or setting the price of the commodity, or adjusting production levels throughout the country.

That's where private enterprise are determined. And we let those markets move forward. What we're doing here at the US Department of Energy is sending a strong signal to the US energy industry that we believe in them. We want them to come back stronger than ever, once we get past this coronavirus pandemic.

Because the energy industry in America has underpinned so much of the positive economic activity that we have seen over the past few years. What we're also doing is taking advantage. You mentioned earlier some of the discount pricing, if you will, for oil worldwide. Rather than buying high and selling low, we're going to buy low and potentially sell high, depending on what Congress wants to do in the future.

So what we're doing is advantaging ourself-- or advantaging the taxpayer, I should say, to the discount pricing of the lower pricing that we're seeing in the marketplace today. The Strategic Petroleum Reserve was set up in the '70s for precisely these types of events and precisely these types of reasons. It was set up during the time period in which America was an energy importer.

And back then, a few countries got together and said, we're no longer going to sell them oil, which created an extreme market disruption. So that's what the reserve is for. We're going to fill it up, as the president said last Friday. And we began that activity yesterday.

JARED BLIKRE: Mr. Secretary, Jared Blikre here. I want to ask you about the ongoing price war if we could just shift gears a little bit between the Saudis--

DAN BROUILLETTE: Sure.

JARED BLIKRE: --and Russia. And President Trump has described the situation as, quote, "devastating to Russia." And he said, quote, "At the appropriate time, I'll get involved." I'm just wondering, what does that entail for the administration there?

DAN BROUILLETTE: Well, I think we have to allow the Saudis and the Russians to work out their disagreements. They tried to do that a few weeks ago, as you know, in the OPEC meeting. I think there was an announcement, or at least an expectation at that point in time, that they would get together again sometime in the near future.

We'll have to wait and see how that plays out. I think the president is keeping very close tabs on this, if you will. And if appropriate, at the right time, if it makes sense, I'm sure he'll weigh in. But I don't gather that today is that day. We have to let these parties get together and work out their disagreements amongst themselves.

- Mr. Secretary, as you say, the president is watching these negotiations between Russia and Saudi Arabia very closely. And I believe you mentioned yesterday that he would indeed be willing to intervene if that were the case. Just from a mechanics standpoint, if that were to happen, what's the protocol? Would the Department of Energy play a role in that, for example?

DAN BROUILLETTE: Yes, we would. I mean, I've been in close contact with my counterpart in Saudi Arabia, Prince Abdulaziz. He is the energy minister there. We chat on a somewhat regular basis. I don't want to overstate that. It's not a daily basis.

It's certainly not every moment of every day, but we have had conversations about some of the activities there. So it would be primarily the Departments of Energy, the Departments of State, and its diplomatic role engaging in this conversation.

- Real quick, just want to ask you about gas prices, sir. We saw them fall to $0.99 in Kentucky. As the country continues to shut in, we know that New York-- for instance, Governor Cuomo is essentially saying 100% of the state workforce must stay at home in New York state-- 100% of the total workforce.

That is new, except for essential employees, food stores. And I'm going to repeat that news in a second. With gas [AUDIO OUT] falling, if people are staying in, can refineries shut down and then ramp back up in a speed necessary to make sure that people can get gasoline and get to jobs when we get on the other side of this crisis?

DAN BROUILLETTE: Yes, they can. The conversations that I've had with the major company CEOs give me a lot of confidence that they're approaching this pandemic, if you will, with exactly the right approach. They're taking care of employees first and making sure the health and welfare, safety of the employees are at the top of their lists. So you're going to see a lot of adherence to these policies of stay at home, self-quarantine, telework.

Those types of policies are very important for us to follow. The CDC guidelines are very important for us to follow. So those companies are going to do that. But at the same time, they're maintaining operations very safely throughout this whole pandemic. Importantly, as well, it's not only just the refiners and the refineries. It's also the producers that are maintaining that posture.

One of the incredible things that's occurred over the last 10 years is the development of these newer technologies that allow industries like the shale producers here in the United States, on both the gas and oil side, to come in and out of the market in very, very short order. That's a development that's recent. It's relatively new. And it changes fundamentally the entire business of energy production.

- All right, Secretary of Energy Dan Brouillette. We appreciate your bringing us up to speed here at Yahoo Finance. We wish you the best for this crisis, sir. And we'll be checking in with you from time to time.