“Leave the oil to me, we have more oil and gas than any other country in the world, including Saudi Arabia and Russia, and we are going to take advantage of it,” Donald Trump said after his victory. Although this statement is not true, since the proven crude oil reserves of Saudi Arabia and Russia are much larger than those of the United States, yes, it is a clear statement of intent. Trump will use all his political power to force the United States (they are the largest producer of crude oil in the world although they do not have the largest reserves) to increase the pumping of crude oil and gas, which , ceteris paribuswill increase global supply and could lower oil prices. The other part of Trump’s promise is to cut energy prices in half in just 12 months.
Oil futures fall more than 1.5% in the market. Two factors (related to each other) are at the origin of this decline after several increases in the price of crude oil. Donald Trump wins the US elections strengthens the dollarwhich exerts a certain downward pressure on crude oil, which is denominated in this currency (the “more expensive” the dollar, the more expensive crude oil is in relative terms for the rest of the countries), on the other hand, The promises Trump’s decision to liberalize drilling, exploration and extraction of crude oil on US federal territory as much as possible raises hopes in the medium term that the United States will continue to flood the world with its oil as long as their proven reserves last. Today, the United States produces 13.2 million barrels per day, four million more than Saudi Arabia or Russia. With Donald Trump at the helm of the White House, this figure could continue to rise.
Brent, the benchmark in Europe, stood at $74 per barrel, while West Texas, the benchmark in the United States, fell to around $70.8. What is happening in the oil market? The price of oil is influenced by various factors, including political decisions and geopolitical events.. The US presidential election could have a significant impact on energy markets. For example, a Donald Trump victory would be favorable to the American oil industry because of its support for fossil fuels. Trump will pave the way for U.S. oil companies to safely drill on federal lands, providing certainty and increasing investment by U.S. oil companies.
It is important to consider that implementing an administration’s energy policies can take time and that other factors, such as global demand, OPEC+ decisions, and global economic conditions, also play a role. . a crucial role in determining oil prices. So, although a change in US administration can influence the energy market, it is not the only determining factor in the evolution of oil prices. Today’s movement is therefore anecdotal, the important thing in Trump’s victory is the impact that his policy will have on the American oil industry in the medium term.
From the Reuters agency they explain that Trump’s victory The long term could be bearish for oil, as Trump’s policies will be favorable to the US oil and gas industry, while trade protectionism could lead to lower demand, according to analysts consulted by the agency .
Trump, the friend of oil
Trump has consistently stood out for his support of the traditional energy sector, urging companies to drill and eliminating administrative and tax barriers to facilitate their operations. Their continued protests delegitimizing the fight against climate change have also represented support for the traditional business of fossil fuel companies. Recurrently, the former president used the slogan that the Republicans have popularized since 2008: “Drill, baby, drill (drilling, honey, drilling)” and his phrases still resonate, like the one tweeted in April 2020, while the covid epidemic shocked the West: “We will never let the great American oil and gas industry down.”, Trump even before the primaries began courting important oil “barons,” in more prosaic terms, potential donors to his campaign.
Quite the opposite of some Democrats who, during Biden’s mandate, had serious clashes with oil companies. One of the most notorious occurred in June 2022, when the president attacked giant ExxonMobil for not producing more gasoline, with fuel prices impacting Americans’ pockets. “Exxon made more money than God this year” He said, arguing that taxes paid by oil companies should be increased after a few months with profits “falling from the sky” soaring after Russia’s invasion of Ukraine and strained global energy markets.
Given these protests, it seems that a return of Trump would mean a new “spring” for the sector. However, what has happened since the pandemic means that oil production can hardly increase further. That’s the view of Ed Crooks, vice president for the Americas at energy consultancy Wood Mackenzie, in a report released this month, in which he noted that “the powers of a U.S. president to influence oil and gas production in one direction are often overestimated.” or another”. Their analysis suggests that, on the contrary, it is possible that a return of Trump could stimulate domestic demand and push up prices.
Trump’s campaign comments, as he would like to do “dictator for a day” To solve two problems, “that of drilling and that of closing the border”, they emphasize the use of executive actions and regulatory changes to ease the regulatory burden on oil and gas companies. The Environmental Protection Agency announced new rules late last year for reduce emissions oil and gas operations, including a ban on routine flaring in new wells, requirements for extensive monitoring of methane leaks, and new standards for equipment such as controllers, pumps, and storage tanks. The Trump administration can be expected to remove all of these provisions.
Other climate-focused policy initiatives would also come under pressure. The Securities and Exchange Commission (SEC) is working on final versions of its new rules on climate-related disclosures, including broadcast informationwhose publication is planned for this year. The SEC is an independent agency, but a President Trump could overturn the current majority of Democratic appointees and block these rules, Crooks notes.
On some issues, the Wood Mackenzie analyst continues, the political pendulum swings from one side to the other with each change of administration. One of the clearest examples was that of Keystone XL Pipelineonce intended to transport crude oil from the Canadian province of Alberta to U.S. refineries. In 2015, Democratic President Barack Obama ended the initiative. In 2017, Trump allowed it again. A few weeks after his arrival at the White House, at the beginning of 2021, Biden gave the “final blow of grace” to the project.
Explore and drill for more oil
He federal lease for land and water Oil and gas development is another area that would change, Crooks pointed out. The America First Policy Institute, a think tank where several former officials from the first Trump administration work, says leasing restrictions under Biden represent a “war on American energy.” The current government has slowed the pace of land lease sales and imposed new restrictions on oil and gas development in Alaskaincluding the cancellation of leases already issued. In the Gulf of Mexico, the administration has proposed the smallest possible lease sales program consistent with its offshore wind development goals under the terms of the Inflation Reduction Act of 2022.
A change in approach to regulation and leasing would undoubtedly be welcomed by many in the U.S. oil and gas industry – but not all – and could reduce production a little further, Crooks says. But crude and condensate production in the contiguous 48 states (excluding Alaska, Hawaii and other island territories) has increased by about two million barrels per day under the Biden administration, he counters: “If the policy Almost half of this increase comes from New Mexico, where most of the harvest is on federal land.
Despite everything, the limited margin available to the United States to increase the supply of crude oil limits the impact of Trump’s policies on the price of “black gold”. It is true that “the affairs of shale oil gradually improves its productivity and manages to offset cost inflation through consolidation, scale and technological progress…we believe, however, that the scenario of a landslide victory for Trump would have marginal effects on the oil market. However, there is great uncertainty about the influence of such a US presidency on oil policy outside North America and, in particular, in the Middle East,” say Julius Baer experts in a note recently published.
