With Donald Trump back in the presidential race, many are wondering what his winning would mean for the U.S. energy sector following three yeas of strong climate policies and restrictions on new oil and gas development. Would Trump pursue greater oil and gas investment in the coming years, or would he continue the path President Biden is forging for a green transition?
During his term in government, Trump continually voiced his aims for greater energy independence. This meant approving widespread oil and gas production, aimed at enhancing U.S. energy security, to decrease foreign energy imports. By Trump’s last year in office, oil imports fell to 7.9 million bpd, compared to 10 million bpd under President Obama in 2016. While this shows a significant fall in the quantity of oil imports, the U.S. never reached full energy independence, as is so often claimed by the Republican party.
The Biden administration has often been accused of moving away from the pursuit of energy independence by imposing restrictions on new oil and gas drilling. However, in response to the growing global demand for crude following the Covid-19 pandemic, U.S. oil production during Biden’s first year was higher than during either of Trump’s first two years in office. Experts suggest that is it economic factors and pressure from Wall Street that have deterred U.S. oil firms from significantly increasing production, which would likely be the same under another Trump government. While Trump would likely make oil leases more accessible, this would affect long-term oil production rather than immediate output.
During his previous term in office, Trump took the U.S. out of the Paris Climate Agreement, stating that it undermined the economic ambitions of the country. Going forward, the public wants to know if Trump would continue his strong backing for oil and gas and whether he would support the development of the diversified energy mix that is currently emerging in the U.S. Republican policy experts and Trump’s campaign website suggest that, if elected, Trump would likely dismantle a lot of the climate progress made by Biden in favour of further fossil fuel development.
In terms of climate progress, Trump has pledged to once again pull out of the Paris Agreement. Experts believe that Trump would also look for ways to stop the tax breaks introduced under the Inflation Reduction Act (IRA) to use the money in other sectors. However, this will largely depend on whether Republicans control both the House and Senate after November’s elections.
The electric vehicles (EV) industry has grown rapidly under the Biden administration, supported by tax breaks and other financial incentives provided under the IRA. The U.S. is currently planning for a major shift away from internal combustion engine (ICE) vehicles to battery electric alternatives, supported by a huge investment in the country’s charging infrastructure. Meanwhile, Trump has regularly stated his opposition to EVs and would likely encourage automakers to slow their shift towards EV production to continue manufacturing ICE vehicles for longer. However, this may be a tough feat in states that have already invested heavily in EV charging infrastructure in anticipation of the rising public demand for EVs. Nevertheless, any push to slow the development of the EV market will likely result in a prolonged U.S. demand for oil and gas, which is currently expected to peak between 2025 and 2027 before slowly declining.
Trump has been very vocal in recent appearances on issues of energy and migration, stating more than once that if he was “dictator for one day” he would address two issues: “for drilling and for closing the border.” This suggests that he will strongly support oil and gas production above renewable alternatives, making the investment environment more favourable for oil majors for years to come.
The U.S. has rapidly developed its natural gas production and developed new export links in recent years, in response to the Russian invasion of Ukraine and subsequent sanctions on Russian energy. LNG production is expected to continue increasing as new projects come online and exports to Europe and other countries are set to soar. If elected, Trump would likely greenlight more gas projects and support the export of huge quantities of LNG to counter Russia’s global energy dominance. He is also expected to redo the U.S. Interior Department’s five-year offshore oil and gas leasing programme to expand the size and scope of drilling auctions.
Overall, it seems clear that if Trump is elected to serve another term as president, he will reverse much of the work done under the Biden administration for climate change. His election will likely stall the progress of the IRA, as investors in renewable energy and clean tech wait to see whether the tax breaks and other financial incentives introduced under Biden remain in place. Further, Trump is expected to bring an end to any restrictions on oil and gas leases and facilitate the expansion of the fossil fuels industry for years to come.
By Felicity Bradstock for Oilprice.com