Donald Trump took credit for US oil independence. How will coronavirus change that? – ABC News

"Make America Great Again".

It was the slogan, slapped across T-shirts and baseball caps, that propelled Donald Trump to the White House.

A protectionist platform promising to rip up global trade pacts, reduce the country's dependence on foreign powers and, in the process, create hundreds of thousands of American jobs.

Among his campaign pledges was the promise to eliminate the nation's reliance on overseas oil cartels by transforming the nation into an energy-producing powerhouse.

Not only would this satisfy his put "America First" strategy, it would also appease voters in oil-rich Republican states, crucial to his election in 2016.

In September, the US cracked a major milestone -- it exported more petroleum than it imported for the first time since records began.

It was no small feat for a country that has strived for energy security for more than 40 years since the Arab oil embargo crippled Americans at the fuel bowser.

Former President Richard Nixon promised to make America energy independent within a decade. It took much longer than that and certainly wasn't all the doing of Trump, although he's taken the credit.

Technology breakthroughs a decade ago unlocked vast onshore deposits triggering the shale oil revolution, allowing America to squash its dependency on foreign powers and reshape the global market.

But the energy independent mantel brings inherent risks.

America's risk profile flipped. No longer was it at the peril of offshore producers but it is now heavily exposed to global shocks as a major producer of oil.

The investment flooded the world market with high-cost oil, funded by debt a rapid expansion that Trump has continued to back while abandoning other forms of power, like renewable energy.

There's no doubt the nation's energy supply is now far more secure than it once was, but the term "independent" is rubbery, at best.

America still needs to import some grades of oil that it doesn't have.

Secondly and crucially, the oil market is worldwide, which means producers and consumers remain at the whims of global price volatility caused by supply shocks, like a global pandemic.

During the single, largest synchronised global shutdown in modern history triggered by COVID-19, Russia and Saudi Arabia started a price-war, after talks to cut production broke down.

Breaking down the latest news and research to understand how the world is living through an epidemic, this is the ABC's Coronacast podcast.

The feud started hurting electorally important states for Trump, like Texas and Louisiana, prompting him to urge an end to the spat. But the deal was unable to overcome the global shutdown impact.

The industry got caught in a perfect storm of circumstances out of its control, but let's be clear shale oil's financial problems predate the current crises.

The two events simply laid bare the flaws in America's energy strategy and the fragility of the industry that has made it what it is today.

"The fundamental misstep was to only focus on the commodity of oil and not diversify our production," Paul Bledsoe, former energy advisor in the Clinton and Obama Administrations, told the ABC.

"Even George W Bush pursued a strategy of diversification. There's been a bipartisan tradition to reduce our oil vulnerability, which Trump reversed."

US shale producers, which have far higher costs than their Arab and Russian rivals, are collapsing, reversing a decade-long march towards energy independence.

The very industry whose growth allowed Trump to boast of cutting US dependence on Middle Eastern oil, and freed his hand to sanction energy exporters from Iran and Russia, is now on its knees.

The defining moment arrived when oil prices plunged below zero for the first time. While it's since bounced back into the green, it's well below the level needed for American producers to break even.

Hundreds of thousands of jobs are at stake.

Norwegian-based energy consultancy, Rystad, expects hundreds of US explorers and producers to go bankrupt by the end of next year.

The process used to extract the shale oil has seen its biggest monthly decline in history, offering an indication of what's to come.

Here's the punchline: the coming decimation of American shale oil firms will most likely lead to a renewed dependence on Saudi oil.

The industry has weathered previous economic storms, propped up by government striving for energy security and a Wall Street eager to find new investment after the Global Financial Crisis.

But the unprecedented confluence of events could prove to be the final nail in the coffin.

It's an important lesson in economics: never put all your eggs in one basket.

Producers are now pleading with Washington to ease the pain by cutting foreign oil imports or including them in bailouts to stave off bankruptcy and job losses.

Strategic reserves across the country will fill up soon, and dozens of oil tankers are stationed off the coast, acting as pseudo storage facilities.

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Further complicating the problem is a fleet of Saudi vessels laden with oil heading to ports in Texas and Louisiana.

It's prompted an angry backlash from senators in oil states, which have pressured the president to impose tariffs or prevent them from unloading.

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Senator Ted Cruz of Texas, a Trump ally, has urged the President to extend federal credit for failing companies, warning it could be the difference between maintaining domestic security and a return to foreign oil dependency.

Trailing in the polls and under fire for his response to the pandemic, Trump can't afford to lose the support of Republican states as he seeks re-election in November.

Support of some kind looks inevitable.

Trump has directed his treasury secretary to come up with a plan to channel funds into the industry.

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Government loans would be an extreme and politically dangerous measure to blunt further economic pain for an industry already under significant pressure and drowning in debt.

"I think that's a big moral hazard because it's not an essential service," Bell Potter Securities broker, Giuliano Sala Tenna, said.

"We're talking about government getting involved in private business interests.

"It makes no sense from a policy perspective to hold onto this mantle as being an energy independent nation when they're doing it at a great cost to taxpayers it's completely uneconomic."

Whatever form it takes, it looks like the retreat of the US oil sector could be every bit as stunning as its rise.

The Energy Information Administration (EIA), has forecast the United States will return to a "net importer of crude oil and petroleum products" in the third quarter of 2020.

It's a crushing blow but the bigger implication is what it means for the tens of thousands of workers the multi-billion-dollar sector now employs.

The price collapse is being felt in several red states, but the pain is most profound in Texas, which produces 40 per cent of the nation's crude and much of its shale oil.

How the Trump administration responds to the crisis and the efficacy of its measures will be vital litmus tests leading up to November's general election.

If a financial bailout proves too politically damaging and the worst of the crisis can't be averted, the fallout could hurt the president's chances in the state, which is already turning blue.

The 2018 mid-term elections revealed how Texas's electorate is becoming younger and more racially diverse than ever, propelling the Democrats to flip several congressional and statehouse seats.

While many observers say this triggered the shake-out the market had to have, others believe it presents a pathway to diversify away from the black gold.

"My view is this is an opportunity for us to begin to make bigger investments to make us less vulnerable to oil price shocks," Mr Bledsoe said

"I am advocating very robust investment in, for example, electric vehicles and electric vehicle-charging stations."

It's still six months until election day, effectively a lifetime in modern-day oil markets.

But with little sign the global economy is on the cusp of reopening, and a market now awash with oil, the price is bound to remain in the trenches for months.

The US economy is already reeling with 30 million Americans out of work while the pandemic confines vast swathes of the population to their homes.

The nation's newfound exposure to oil markets will only make matters worse.

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Donald Trump took credit for US oil independence. How will coronavirus change that? - ABC News