I do not know who will win the US election. But one thing we can probably all agree on is that incumbent President Donald Trump has had a tremendous impact on the global oil market. From crippling oil exports to Iran and Venezuela to obtaining loans to mediate major voluntary production disruptions, Trump’s fingerprints are gone.
How can this change after the November vote?
US oil industry
Things will continue more or less as they are if Trump retains his seat in the White House. I could not find any new initiative on his campaign page, while the specific achievements listed on his energy and climate page consist mainly of overturning the actions of his predecessors.
The main achievement of opening more rents and expanding offshore oil and gas drilling may not be all that it seems. Less than 1% of the Gulf of Mexico blocks offered for rent draw bids on the six sales completed so far during the Trumps presidency, according to documents posted on the Department of the Interior website. The results of a seventh sale are expected to be announced next month.
If Joe Biden wins, things will certainly change for companies and local energy policies. The climate plan of the Democratic candidates includes the following:
- Searching for aggressive methane pollution limits for new and existing oil and gas operations
- Permanent protection of Arctic National Housing and other areas
- Prohibition of new oil and gas access to public lands and waters
- Modification of fees to calculate climate costs
Contrary to what Trump has claimed, the Bidens platform does not include stopping fragmentation, the process of breaking down narrow rock formations by pumping water, sand and chemicals into them under high pressure to extract gas and oil.
Whoever wins, they will face a landscape where domestic and global 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 enough to maintain current production levels for another 50 years.
Neither the US nor the world in general has a shortage of oil already discovered underground. But both are clearly facing a lack of virgin desert.
A change in the White House policy towards tackling global warming could affect oil and gas countries. But a green energy program could leverage the skills of laid-off oil workers either by supporting offshore wind farms or closing the 3 million abandoned U.S. oil and gas wells that are leaking abundant amounts of oil. methane, a powerful greenhouse gas, in the atmosphere.
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 raw and refined products are now limited to China, Syria and Venezuela, with small volumes of oil possibly smuggled elsewhere. Sanctions against Venezuela have helped boost production at what was Latin America’s largest oil producer to its lowest level in nearly 100 years, according to figures published 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 oil supply in the Covid-induced collapse of demand if those two countries were still pumping 5.8 million barrels in days as they were when Trump took office.
Under Biden, I would not expect a sudden easing of sanctions on Iran or Venezuela. The return of the United States to the Iran nuclear deal is a policy goal, but it may not be high on its agenda. What is most likely is that both sanctioned countries would test the U.S. determination to police its current restrictions. A Biden presidency probably can not allow every country to oust them without losing influence. It would be much more difficult, for example, to get Iran back in full compliance with the nuclear deal if it could already export all the oil it wanted.
Trumps took a keen interest in OPEC actions. He walked away from Twitter diatribe against the organization and its allies to help mediate the largest production cut ever before this year. He was pushing with an open door the de facto leader of OPEC Saudi Arabia and the new ally of OPEC + Russia had already realized the mistake of allowing their previous cooperation to collapse. In the end, Trump’s contribution seemed to offer some vague compensation for the lack of Mexico cuts, which in practice seems to be little more than an accounting stunt.
A Biden presidency is unlikely to have anything like the same impact on OPEC. He has signaled that he intends to take a much tougher line with Saudi Arabia and others on human rights. This will gain him a few friends in the Arabian Peninsula.
But history is on America’s side, at least from an oil perspective. The US is far less dependent on Middle Eastern oil than at any time since the mid-1980s. And OPEC + oil producers have to keep prices high enough for their economic needs, so they are likely to continue manage supply even without incentives from the White House.
But the impact absolutely no. 1 of a change of president would be none of these. It would be the impact on wider markets, the risk appetite between investors and traders, and the value of the dollar.
Oil prices have been sent in flight and falling by Trumps words (spoken or posted on Twitter) and actions. A turn back in one less style on your leadership face (if that is the result) will reduce giraffes. This can lead to a stable oil market, but it will also be less fun to write about.
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