Journalist Irina Kezik on how the change of power in the United States can change the global oil and gas market.
The presidential race in the United States is entering the home stretch. The election, which is scheduled for Nov. 3, is just over two weeks away.
Investors are closely following the events overseas, which instantly reflect on oil and financial quotes. It is worth recalling that the news of President Donald Trump’s COVID-19 infection immediately affected oil prices. The price of the North Sea Brent Crude fell by almost 5%, and West Texas Intermediate by 6%. Experts are worried about what will happen to the global markets if 74-year-old Trump and his opponent, 77-year-old former Vice President Joe Biden, who has recently been in contact with Trump, withdraw from the race, and the election has to be postponed. But both candidates are in the trenches, or rather, in the struggle, and each continues to make preelection promises. Republican versus Democrat, black gold versus green energy.
One of the most high-profile statements made by the Democratic presidential candidate was a pledge to invest $2 trillion in the development of clean energy sources by 2025 and to fully convert the U.S. fuel and energy complex to green energy by 2035. If Biden becomes president, the government will not issue new licenses for the use of hydraulic fracturing technology (fracking) according to his platform. However, the ban will only affect public lands; drilling on private land will still be allowed.
In addition, the Democratic candidate intends to improve the supply chains and domestic distribution, including restricting imports from countries such as Russia and China. Biden is calling for a $400 billion, four-year increase in government purchasing of U.S.-based goods and services. To this end, Biden intends to increase taxes that were reduced by the current administration.
Trump reversed Barack Obama’s anti-hydrocarbon strategy and pulled the United States out of the Paris climate agreement on greenhouse gas emissions, claiming that global warming was invented by China. To this day, Trump never gets tired of calling Biden supporters out-of-mind Democrats. In July, when Biden presented his Green New Deal, Trump visited Texas, where at a meeting with oil and gas workers, he said that if he is not elected, “you will have no more energy coming out of the great state of Texas.”
Among other things, in his opinion, the United States has to buy oil from Russia because the Democrats oppose the construction of pipelines in the country. New England has the highest energy prices in the United States. Why? According to Trump, because of New York Gov. Andrew Cuomo. “We can’t get energy because New York doesn’t allow the pipelines to go through. And that’s going to be very costly for New York…” Trump says.
The subject of pipelines has always been a critical subject in the United States. Obama stopped construction of the strategic Keystone XL pipeline, and Trump resumed construction in 2017.
Today, the U.S. remains one of the three world leaders in the production and export of hydrocarbons. While the largest oil producers are joining alliances and agreeing to cut production during the pandemic to balance the market, the United States is taking advantage of the recovery in prices and continuing to send its tankers and gas carriers toward Europe. And it is paying off. Annually, revenues from hydrocarbons exports amount to approximately $280 billion, according to an estimate provided by IHS Markit experts at least 1 1/2 years ago.
Yes, we can blame the crisis for the decline in production, but nevertheless, the figure is strong. A few years ago, it was generally accepted that U.S. oil revenues account for only 1% of the total gross domestic product; now, some experts have a different opinion. According to PricewaterhouseCooper’s calculations, the U.S. oil and gas industry directly and indirectly provides jobs for 10.34 million people, which is equivalent to 5.6% of the total working-age population of the country. Plus, the total contribution of the oil and gas industry to the U.S. economy is $1.3 trillion, which is 7.6% of the GDP.
It is possible that if Biden is elected, oil prices will increase after he makes his first statements about shale producers or takes his first action against their activity. However, it is still difficult to imagine that the U.S. under Biden could lose up to $1 trillion in income. And will he be allowed to do it? Popular statements about green energy are trendy, but they are unlikely to be followed by radical changes to U.S. energy policy because there is too much money at stake.
So far, Biden leads Trump by 17 points in popularity polls among voters, as a Guardian opinion poll shows. But there are still two weeks to go, and it is worth recalling that we saw a similar picture four years ago, when Hillary Clinton was leading the race.
The author is a columnist for Izvestia, and editor-in-chief of the Oil and Gas Vertical magazine. The author’s opinion may not reflect that of the editorial board.