US energy sector may not get the certainty it craves under Trump

OPINION: For the past four years, the US oil and gas industry has bemoaned the “uncertainty” surrounding energy policy under President Joe Biden.

Though operators aren’t exactly hurting — many of them scored record profits in 2022 as commodity prices spiked at the Russia-Ukraine war’s inception — they’ve had reason to complain.

Amid crushing inflation and growing energy demand, Biden has curtailed fossil fuel leasing in favour of renewable power, and he has brought new liquefied natural gas export approvals to a crawl, which has alarmed allies.

Sure, some key energy themes will play out during the Trump remix. Domestic production will be top priority, as will hawkishness on Opec producers, especially Iran. Renewable energy may not be discarded altogether, but it will be cast aside in favour of fossil fuels.

A new Department of Energy (DoE) secretary will be appointed, as will new chairs of the Federal Energy Regulatory Commission (FERC), the Federal Trade Commission (FTC), and the Securities & Exchange Commission (SEC). All of those agencies will scrutinise oil and gas, and its potential climate impact, far less than the Biden administration did.

Trump may also fill his second administration with more “yes men”, and he is projected to have Grand Old Party (GOP) control of both the House and Senate, so his agenda, while malleable at times, is a bit more likely to stick, at least until the mid-term election in two years.

‘He embrace chaos. He wants chaos.’

Trump has been known to needle even his closest advisors and allies. He didn’t always listen to supermajors such as ExxonMobil and Chevron and, as Slocum said, “he pissed them off a lot”.

Not to mention that Trump is re-entering the White House in a far different world than when he begrudgingly left four years ago. Russia and Ukraine were not fighting, and tensions in the Middle East had yet to ignite. New LNG exports were not banned. Inflation was not quite a household term. So his energy policy will have to shift this time around.

Trump’s perpetual tango with Russia's President Vladimir Putin is where energy matters get particularly complicated.

Over the past two years, Europe and Asia have continued to demand US LNG. If Putin asks Trump to curtail LNG to Europe, will he do so? If exports can’t go to Europe, will Trump let US LNG go to China, a nation he has viewed with increasing scepticism?

And will Trump introduce any tariffs on energy imports? If so, how will that affect refiners’ bottom lines and prices at the pump? Could it exacerbate inflation, one of the top reasons why voters rejected his Democrat rival Kamala Harris in the presidential election?

Let’s say Trump stops funding Ukraine’s war efforts against Russia and the conflict ends swiftly. Could that push some neighbours, even European ones, back towards Russian oil and gas? If Russian sanctions are lifted and more gas re-enters the market, global supply gluts could worsen, depressing prices further and hitting producers’ bottom lines.

Will Trump introduce sanctions on Iran that could curb their oil exports? Could Iran’s oil infrastructure be attacked amid the ongoing violence in the Middle East?

Will Trump try to abolish or weaken Biden’s signature Inflation Reduction Act? If so, what does that mean for clean energy subsidies, particularly lucrative carbon sequestration tax credits? And what will that mean for global net zero targets, which are leaning heavily on carbon capture technology?

What role will Elon Musk play? Will he push Trump for more electric vehicle support? Or will both billionaires focus more on X instead?

Too many questions remain for the second coming of Trump for energy companies and their investors — who arguably love certainty more than anything — to reasonably guess what will happen for the next four years.

Production may grow, but that won’t happen immediately. The supermajors, or even regional players, may enjoy freer access to the White House, but which version of Trump will occupy the Oval Office is anyone’s guess on a daily basis.

Trump may just get out of their way, and that may be exactly what they want — a hands-off Republican who lets them “drill, baby, drill”.

The early market reaction showed favour toward Trump’s victory, because he’s likely to be friendlier toward business interests. But the markets were also happy just to get past the finish line, as AJ Bell investment analyst, Dan Coatsworth, noted, and seemingly without any major political violence, a la the 2020 election.

A victory by Harris would have led to a predictable continuation of Biden-era policies, perhaps with a leftward nudge. The collective oil industry would have predictably groaned.

But with Trump, every day is the flip of a coin. Oil majors can only hope it’ll land on heads for them most of the time.