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“We’ll drill, baby, we’ll drill!” so thundered Donald Trump in his July 19 speech at the Republican National Convention, where he accepted his party’s nomination for president. To enthusiastic applause, he waxed enthusiastic about the subject, promising to boost domestic fossil fuel production to “levels that nobody’s ever seen before,” making the United States so “energy dominant” that it will “supply the rest of the world.”
Trump is assiduously courting oil magnates. In April, he invited a group of them to Mar-a-Lago, his private club in Florida, and promised to scrap what they see as President Joe Biden’s burdensome regulations on the industry if he returns to the Oval Office. He asked only that they contribute $1 billion to his reelection bid, arguing that the figure would be a bargain compared with the windfall they would receive from lower taxes and looser rules.
Trump and his team are interested in both unleashing the American oil industry and dismantling Biden’s clean energy agenda. His supporters invoke vast untapped oil reserves in Alaska and the Gulf of Mexico that would gush forth if the green boot were removed from the industry’s throat. Robert O’Brien, who was national security adviser under Trump, suggests that “the United States could be producing millions more barrels per day.” Yet the Trump team’s plans are likely to be far less consequential for American energy, both brown and green, than they appear.
American oilmen have long complained about Biden and are likely to have similar reservations about Kamala Harristhe vice president and all but certain Democratic nominee for the November presidential election after Biden dropped out of the race on July 21. Her signature legislative achievement, the Inflation Reduction Act (IRA), for which Harris cast the tie-breaking vote in the Senate, explicitly seeks to encourage the use of low-carbon energy through massive subsidies for green technologies.
Biden has also regulated the fossil fuel industry’s emissions of methane, a potent greenhouse gas, and in January halted approval of permits to export liquefied natural gas (LNG), angering bosses. The American Petroleum Institute, a trade association, has denounced a “regulatory onslaught.” One lobbyist in Washington complains that the White House is making the oil industry feel “unwelcome today and will be even more unwelcome in the future.”
Donald Trump and his team are interested in both liberating the American oil industry and dismantling Biden’s clean energy agendaDonald J. Trump Facebook Photo
However, Despite all the complaints, the US fossil fuel industry has done remarkably well under the Biden administrationOil and gas production last year was higher than at any time during Trump’s term. The Biden administration issued more drilling licenses during its first three years than Trump did. Exports have soared. Last year, the president approved Willow, an $8 billion oil project in Alaska opposed by environmentalists. Profits and dividends at U.S. oil giants have risen under Biden. The Dow Jones U.S. oil and gas index, which tracks the industry’s market value, faltered under Trump. It has more than doubled under Biden, helped by a surge in prices.
An energy expert who has advised former Republican presidents acknowledges that “no federal policy significantly restricts near-term production” of oil or natural gas, and he sees “no options that would allow oil and gas production to increase” much more than expected. The market would have dictated that anyway. Harold Hamm, a shale billionaire and ardent Trump supporter, recently declared that the industry is “producing as much as we can.”
In the long term, sustained hostility from a future Democratic president could, in theory, dampen investment in America’s oil and gas resources, but such policies are not obvious. The closest thing is the pause on LNG export permits. However, that election-year huff and puff was halted by a federal judge earlier this month and appears unlikely to survive.
Ultimately, investment in the oil business “depends on global supply-demand balances and investor appetite,” says Kevin Book of ClearView Energy Partners, an energy research firm. The most important factor affecting those balances is not the White House but the Organization of the Petroleum Exporting Countries, the oil cartel that sets production quotas to manage crude prices.
It’s more, It is Wall Street, not the U.S. government, that determines how Big Oil adjusts its investments in line with supply and demand. Since the shale bubble burst, a period of reckless expansion after the financial crisis during which industry cowboys burned through some $300 billion in cash, investors have sought to rein in oil bosses. Rystad Energy, another research outfit, characterizes the prevailing ethos in the shale patch as “persistent capital discipline.” It’s unclear how much a new president would change the mood.
A Trump victory in November may also do surprisingly little to slow America’s shift toward clean energy.. Although Trump has promised to repeal the IRA, which he calls the “new green scam,” he probably won’t be able to do so, argues Neil Auerbach of Hudson Sustainable Group, a clean-energy investor. About four-fifths of its benefits go to Republican constituencies.
What’s more, for all their hostility to Biden, “brown” industries are as interested in the handouts as green ones. Dan Brouillette, who was energy secretary under Trump and now heads the Edison Electric Institute, an association of private-sector US energy utilities, has vowed to defend the IRA. One oil and gas lobbyist says his clients, who benefit from the law’s subsidies for hydrogen production and carbon-capture technologies, will “go to the mat” to prevent its repeal.
A second Trump administration could still slow the green advance of the U.S. economy by changing regulations and abandoning decarbonization goals, notes Wood Mackenzie, another energy research firm. It estimates that the US is on track to invest $7.7 trillion in low-carbon energy between 2023 and 2050, and expects that figure to fall to $6.7 trillion if Trump returns to the White House. This is unwelcome, given that the US will likely need close to $12 trillion of investment to reach net-zero emissions by 2050; but it would hardly be a death knell for America’s green industries.
During her brief presidential bid four years ago, Kamala Harris expressed support for banning fracking (though she reversed her position after joining Biden’s ticket).Stephanie Scarbrough – POOL AP
Wood Mackenzie’s analysis predates Biden’s exit from the presidential race. Kamala Harris may have greener instincts than her boss. During her brief presidential bid four years ago, she voiced support for banning fracking (though she changed her position after joining Biden’s ticket). As Harris appeals to younger voters, she’s likely to “bring climate ambition,” ClearView’s Book believes. As things stand, though, she hasn’t made any new promises to expand decarbonization efforts.
Whatever happens in November, America’s low-carbon economy has gained momentum of its own. Even without subsidies, adding power to the grid with a solar farm is cheaper today than doing so with a new coal-fired plant. More than 90% of the additional power-generating capacity coming online in the United States this year will be carbon-free. Large commercial customers, such as tech giants, that need ever-increasing amounts of power for their data centers, have publicly pledged to reduce their net emissions to zero. NextEra Energy, a Florida-based utility that is one of the world’s largest clean-energy developers, has pledged to invest roughly $100 billion in solar, wind, batteries and transmission by 2027, regardless of who wins the White House.
Mary Landrieu, a former Democratic senator from energy-rich Louisiana, likes to say that “you can’t run steel with windmills or solar panels.” But she is convinced that in the years since Trump left office, the oil and gas industry “has reached a tipping point in embracing a low-carbon future.” It seems even fossils can change.
The EconomistConocé The Trust Project
