Oil Price
Since day one of President Joe Biden’s term in office, the U.S. oil and gas industry has been criticizing his energy policies, saying that these undermine America’s energy and national security with punitive and restrictive measures against fossil fuels.
Yet, during President Biden’s tenure, American oil and gas production has hit record highs. But this achievement has come despite Biden’s policies, not thanks to them, the industry says.
For his part, the presumptive Republican nominee and former president Donald Trump has pledged to return to the “drill, baby, drill” policies supportive of unleashing more U.S. oil and gas production.
The industry, which feels it has been the target of Biden’s climate laws and provisions, has slammed what it has described as ‘inept’ energy policies and has often expressed frustration with the current Administration and its many energy bills and proposals, including the fewest proposed lease sales in history, a methane emissions tax, and a pause on LNG export project approvals.
“Until the next administration is decided, we’re in a state of flux when it comes to making certain business decisions,” an executive at an U.S. exploration and production firm said in comments to the latest Dallas Fed Energy Survey.
Another comment read, “I can’t recall a more uncertain time with disturbing world conflicts and the choice we have to make in the U.S. presidential election.”
The U.S. oil and gas industry favors Trump for president. It has donated $7.5 million to Donald Trump’s campaign, clearly favoring him over President Biden, who has received just over $1 million from outside groups in the energy sector, according to data collected by OpenSecrets.
However, two of Trump’s leading campaign pledges—scrap the Inflation Reduction Act (IRA) and slap trade tariffs, especially a 60% tariff on Chinese products – may not benefit the oil and gas industry.
The sector, despite criticizing the IRA for its emissions fees, is set to benefit from the IRA funding to get carbon capture and hydrogen projects up and running.
Last year, one of the biggest U.S. oil producers, Occidental, won one of two grants by the Biden Administration to build the world’s first direct air capture plant in Texas that would extract carbon dioxide directly from the atmosphere.
The U.S. Administration has also decided to support hydrogen hubs with $7 billion in funding from the Bipartisan Infrastructure Law. This has stirred a lot of controversy due to the selection of sites planned to produce hydrogen from natural gas with carbon capture and storage (CCS).
Trump has pledged to gut the IRA. However, this would first need a Republican-controlled Congress with both House and Senate. And even then, it could be difficult to scale back or scrap the incentives, as they mostly benefit projects and jobs in Republican states, analysts say.
Executives at the U.S. oil majors have expressed support for the IRA. One of these is none other than ExxonMobil’s chief executive Darren Woods.
“I was very supportive of the IRA — I am very supportive of the IRA — because as legislated the IRA focuses on carbon intensity and in theory is technology-agnostic,” Woods said at the CERAWeek in Houston last month, as carried by the Washington Post.
“They’re not trying to pick a particular technology.”
The American Petroleum Institute (API), despite all its criticism against many of Biden energy policies, also supports the IRA incentives for green technologies that benefit the industry.
“I suspect that when there is an attempt to repeal the IRA — and there will be — it will end up looking more like a scalpel-like approach rather than a butcher knife,” API president and CEO Mike Sommers said at the Houston conference, the Washington Post reports.
“And we’ll advocate for the provisions that we support.”
The U.S. oil and gas industry is also apprehensive about an escalation of the trade war with China, with Trump’s idea to slap a 60% tariff or higher on imports of Chinese goods. If Trump is not dissuaded from this idea, the cost of energy projects is set to rise due to expected increases in steel and aluminum pipes and inflationary pressure from upended trade routes.
By Tsvetana Paraskova for Oilprice.com
