While former President Donald Trump and his fellow Republicans often declare that they want to stop what they call President Joe Biden's “war on American energy,” analysts and environmental activists say the current Democratic president has not acted in complete opposition to the oil and gas sector.
Frenetic campaign rhetoric aside, there are actually expectations that the 2024 presidential race could shake up the fossil fuel industry, given the significant differences between Biden and Trump, the likely GOP nominee.
First of all, analysts expect that Trump will be able to reduce crude oil prices by helping to boost global supply. This will be even as US oil production reaches an all-time high under Biden, which has helped keep prices in check.
Tom Kloza, global head of energy analysis at OPIS, said Trump's second term “will be broadly bearish” for oil prices, meaning it will be characterized by lower prices. He said the drivers behind this would include increased production from Saudi Arabia, which leads the Organization of the Petroleum Exporting Countries, and from Russia, as the Trump administration is likely to be friendlier toward those two countries.
“You might be looking at the Saudis using some spare capacity, sort of a rapprochement between Europe and the United States and Russia, and generally more drilling in the United States and elsewhere,” the OFS expert said. OPIS is an energy data and analytics provider that is part of Dow Jones News Corp, publisher of MarketWatch.
In the very short term, another Trump presidency could be bullish for oil prices, Kloza believes, because Trump will take a tougher stance and potentially impose new sanctions on Iran and Venezuela, which could mean losing “some Iranian barrels, … some oil.” Venezuelan.” “barrels.”
Meanwhile, Kloza stressed that US presidents are not inclined to raise fossil fuel prices as much as other factors do, although they receive much of the blame for any pain Americans feel at the RB00 gasoline pump,
These factors include geopolitical events, technological gains, and supply and demand in the rest of the world, he said.
Citi analysts led by Eric Lee also predicted that if Trump wins in November, “the net impact looks bearish for oil.” In addition to the possibility of increased supply from OPEC+ countries or increased flows due to a previous resolution of the Russia-Ukraine war, there may be trade battles affecting global demand for crude oil, according to the Citi team. During his 2024 election campaign, Trump proposed a 10% tariff on all imports as well as a 60% tariff on all Chinese imports.
“Renewed trade tensions would further impact already weak global trade, impacting trucking and thus diesel demand,” the bank’s analysts said in a note this month.
“A second Trump term would increase conviction in our demand for a $60 oil price in 2025,” they wrote. WTI CL00
It recently traded at around $77 per barrel, while Brent crude reached BRN00,
The global benchmark crude oil is trading at about $81 per barrel.
How about heeding the GOP's calls to “drill, baby, drill?” The Citi team said that the impact of the new Trump administration on the domestic production of oil and natural gas NG00,
“It should be limited, even if the rhetoric is likely to be strongly pro-fossil fuels.” They stressed that domestic production trends in recent administrations have been “primarily driven by technological improvements, production costs and oil prices.”
'Mixed stories' for companies
During the 2020 race between Biden and Trump, ClearView Energy Partners predicted that a Biden win would provide a “sell the company, buy the commodity” type of trade, said Kevin Book, head of research and managing director at ClearView, an independent firm. Research and analysis provider. “Companies producing here will have higher non-maintenance capital expenditures, but the implications of a tightening market, due to lower production, would have been better for the commodity,” he said.
“This was not fully achieved, because regulation was not quite as tight as we initially expected, and production was rather prolific despite management,” Bock told MarketWatch. However, the reversal of that trade “may still be true now.” In other words, traders may want to sell the commodity while buying oil companies if they expect Trump to win a close race for the White House.
However, Bock warned that “there are mixed stories here” for oil and gas companies. He said he's not sure there will actually be a significant increase in crude oil production under Trump, but he “would rather be in the drilling business than the barrel business if the United States is really going to add significant volume under Trump.” “.
There will be “some upside” in shares of companies that “sell oil and gas products – if you sell OIH services.”,
For example, or you work in some kind of additional work.
Where are the negatives? Biden has supported stricter regulations on methane emissions, and this could actually be “empowering” for US companies seeking access to regulated foreign markets such as the European Union, according to Bock.
“If there is real talk about methane deregulation — there are a few different approaches and different areas — that could have implications for exports,” he said.
In addition, Book said, Biden's climate law known as the Inflation Reduction Act provided “cumulative” tax breaks to “companies that may have once called themselves oil and gas companies and that now call themselves energy companies.” A second Trump administration will likely work to eliminate some IRA credits, although a major repeal may be difficult to implement.
“So there may be some weight on those stocks just in anticipation. “It's not clear that these credits are going to go away,” he said.
Overall, the Biden administration's position on fossil fuels has been “nuanced,” according to Book.
“I think they have accepted and recognized the need to keep supply flexible and strong, given the current dependence on fossil fuels,” he said.
That's after the Biden team began focusing on “accelerating the transition away from fossil fuels — looking for ways to do that that may or may not already be market-supported,” Bock said. He added that they are “going back a bit” to this approach before the November 2024 election, with last month's decision to pause new approvals for LNG shipments as an example.
“The energy will be at the ballot box.”
Climate activists and environmentalists describe the Biden administration's handling of one side to the other differently.
“From approving the Willow Project to moving forward with the Mountain Valley Pipeline, this administration has been an ally of industry, until this new pause.” [liquified natural gas] Allie Rosenbluth, co-director of the U.S. program at Oil Change International, a group that aims to end the use of fossil fuels, said:
“Biden clearly recognizes that his re-election is in the hands of young and climate voters, who saw the hypocrisy — that Biden is talking about climate action at one point and also agrees with the root causes of the climate crisis,” she added. He said.
Rosenbluth said that when Trump was president, there was “much less room for attack,” and so under a second Trump administration, her group will aim to “play defense and reduce the harm the industry is causing in communities across the country.”
President Joe Biden delivers remarks on efforts to lower gas prices in June 2022.
AFP via Getty Images
Meanwhile, the American Petroleum Institute – which lobbies for the US oil and gas industry – criticized the pause on new approvals for LNG export facilities. API has also called for increased access to federal lands and waters through onshore and offshore leases, and has pushed for energy permitting reforms.
“Energy will be on the ballot in 2024,” said Dustin Meyer, API's senior vice president of policy, economics and regulatory affairs. “Our message is the same to both parties, which is to acknowledge, understand and appreciate the reality of future global energy demand – and the need to obtain the supplies needed to meet that demand.
“The question is, where will this supply come from?” Mayer added. “We really believe it has to come from the United States. The industry has made a tremendous amount of progress in making us the largest producer of oil and natural gas in the world. That's a good thing, but it didn't happen by accident, and it didn't happen overnight. It was partly the result of decades of Partisan support for the US energy company XLE.
This is what we want to see restored moving forward.
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