While ‘big oil’ in the United States is gung ho about President Trump’s early moves on energy policy, they’ve unanimously baulked at his call to increase production – euphemistically referred to by Trump as “Drill Baby Drill”.
Despite Trump’s swing shift away from renewables and back towards an energy policy heavily favour of fossil fuels, oil and gas company executives say there won’t be a frenzy of new drilling, especially while prices remain where there are.
This is where Trump and ‘big oil’ become polar opposites. While Trump is hell bent on loosening the rules governing extracting, transporting and exporting of fuels – even at the detriment of low-emissions technologies - he also says he won’t stand for higher prices.
Meantime, while natural gas prices have surged along with cold weather in the U.S, oil prices slid below $75 a barrel. The index lost additional ground on Monday as oil prices recently slid below $73 a barrel.
Inflation v oil
By reducing the cost of energy Trump expects keep the inflation genie in its bottle.
Trouble is, without higher prices, oil and gas companies can’t justify spending money on production, which is already at near record levels in the U.S.
Despite the huge amount of positivity, Ron Gusek, president of Liberty Energy says it’s too early to say whether it’s going to change actual activity levels in North America.
Some analysts point to a major mood shift since Trump’s first term in office, which may have caught him off guard. For example, unlike Trump’s presidency 1.0, the entire industry now is more focused on keeping spending in check.
Rather than investing in fracking companies on a strong growth trajectory, Wall Street firms investors now want to back profitable operators.
US gas exports
Ben Dell managing partner of the energy investment firm Kimmeridge Prospective is witnessing more customer interest in long-term deals for U.S. gas exports.
“People want to be early and in the forefront of signing up for U.S. products to try and stave off potential tariff threats,” noted Dell in the New York Times.
In a sharp reversal from his predecessor’s agenda, Trump commenced his presidency by restarting permitting reviews of gas-export facilities.
However, there’s growing concern that Trump’s threat of placing tariffs on trading partners could end up disrupting the oil and gas industry — a highly global industry reliant on imported materials and fuels.
Record oil production
Despite his push towards cleaner alternatives, it’s often overlooked that U.S. oil and gas production hit record high under Joe Biden’s presidency.
Similarly, despite Trump’s efforts to prop up coal during his first term as president, it failed to compete with cheap natural gas with coal consumption falling by over 30% during his first term in office.
In another executive order, Trump also instructed federal agencies to stop issuing leases and permits for all new wind projects pending a new environmental review. There is now a 60-day freeze on new solar arrays and other renewable energy projects on public lands.
Interestingly, while Trump came to office on a ticket that promised to foster investment, some green energy investors are assuming they’re not invited to the party.
For example, shortly after Trump’s election victory, German firm RWE said it would slash spending on U.S. offshore wind development, claiming the risks for new projects there had just gone up