I don’t know who will win in the US election. But one thing we can probably all agree on is that outgoing President Donald Trump has had an extraordinary impact on the global oil market. Whether it’s crippling oil exports from Iran and Venezuela or taking credit for negotiating the biggest voluntary production cuts in history, Trump’s fingerprints are everywhere.
How could that change after the November vote?
American oil industry
Things will continue pretty much as they are if Trump retains his place in the White House. I didn’t find any new initiatives on its campaign website, while the specific accomplishments listed on its energy and climate page are mostly to reverse the actions of its predecessor.
The major accomplishment of opening more leases and expanding offshore oil and gas drilling may not be all it seems. Less than 1% of Gulf of Mexico blocks offered for lease have attracted bids in the six sales made so far during Trump’s presidency, according to documents posted on the Interior Department’s website. The results of a seventh sale are expected to be announced next month.
If Joe Biden wins, things will certainly change for national energy companies and politics. The Democratic candidate’s climate plan includes the following:
- Require aggressive methane pollution limits for new and existing oil and gas operations
- Permanently protect the Arctic National Wildlife Area and other areas
- Prohibit new oil and gas permits on public lands and waters
- Modify fees to take into account climate costs
Contrary to what Trump has claimed, Biden’s platform does not include a ban on hydraulic fracturing, the process of fracturing narrow rock formations by pumping water, sand and chemicals into them under high. pressure to extract gas and oil.
Whoever wins, he will face a landscape where national and world oil and gas reserves are the highest they have ever been. At a time when most forecasters see a peak in oil use by 2040, known reserves are sufficient to maintain current production levels for another 50 years.
Neither the United States nor the world in general is short of oil already discovered underground. But both clearly face a dearth of pristine nature.
A change in White House policy towards tackling global warming may impact oil and gas jobs. But a green energy program could use the skills of laid-off oilfield workers – whether it’s supporting offshore wind farms or plugging the nearly 3 million abandoned U.S. oil and gas wells that spill large amounts of methane, a potent greenhouse gas, in the atmosphere.
The international oil industry
The Trump administration’s “maximum pressure” campaign against Iran has halved the country’s oil production and stifled most of its exports. Its shipments of crude and refined products are now limited to China, Syria and Venezuela, with small volumes of oil possibly having been smuggled elsewhere. Sanctions against Venezuela have helped bring production from what was Latin America’s largest oil producer to its lowest level in nearly 100 years, according to figures released by DeGolyer and MacNaughton.
Producers in the Organization of the Petroleum Exporting Countries and their allies would have had a much harder time trying to balance the supply of oil with the demand collapse triggered by Covid if these two countries pumped another 5.8 million barrels per day as they were when Trump took office. .
Under Biden, I wouldn’t expect a sudden easing of sanctions against Iran or Venezuela. Bringing the United States back into the Iran nuclear deal is a political goal, but it may not be a priority on its agenda. What is more likely is that the two sanctioned countries will test the willingness of the United States to control their current restrictions. A Biden presidency probably couldn’t let either country flout them without losing weight. It would be much more difficult, for example, to bring Iran back into full compliance with the nuclear deal if it could already export all the oil it wanted.
Trump is keenly interested in OPEC actions. He used Twitter rants against the organization and its allies to help negotiate their biggest production cut ever earlier this year. He was pushing on an open door – de facto OPEC leader Saudi Arabia and new OPEC ally + Russia had already realized the mistake of letting their previous cooperation collapse. In the end, Trump’s contribution seemed to offer vague compensation for Mexico’s lack of cuts, which in practice seems like little more than an accounting trick.
A Biden presidency is unlikely to have the same influence over OPEC. He said he intended to take a much firmer line with Saudi Arabia and others on human rights. This will earn him few friends in the Arabian Peninsula.
But the story is on America’s side, at least from an oil perspective. The United States is much less dependent on Middle Eastern oil than at any time since the mid-1980s. And OPEC + oil producers must keep prices high enough for their own economic needs, so that they will likely continue to manage the offer even without the White House’s urging.
But the absolutely # 1 impact of a change in president would be none of that. This would be the impact on the larger markets, the risk appetite of investors and traders and the value of the dollar.
Oil prices have exploded and plunged because of Trump’s words (spoken or tweeted) and actions. A return to a less direct leadership style (if that’s the result) will reduce gyrations. It may lead to a more stable oil market, but it will also be less fun to write.