President Trump's Impact: Shaping Global Energy Markets

Key Takeaways: President Trump's Impact: Shaping Global Energy Markets

Executive Summary

The webinar "President Trump's Impact Shaping Global Energy Markets," hosted by Lee Nichols, delves into the potential effects of a second Trump term on global energy markets. Panelists from Gulf Energy Information, including Kurt Abraham, Paul Hicken, Stewart Penson, and Mike Reed, provide insights into various sectors. Key topics include the US emerging as a net energy exporter, evolving trade relations, and energy security. Abraham discusses the offshore drilling ban's impact on US oil production, while Hicken emphasizes capital discipline in crude oil production. Reed highlights potential regulatory easing for the midstream industry, and Penson addresses the uncertain future of the hydrogen sector under Trump. The discussion also covers the implications of tariffs on oil imports, the role of the Trump administration in the Middle East, and the potential impact of tax credits on clean fuel production. The webinar underscores the complexities and uncertainties of energy policies and projects under a Trump administration, with significant implications for the US and global energy markets.

Speakers

Kurt Abraham, Editor-in-Chief and Chief Forecaster, World Oil
Paul Hickin, Editor-in-chief, Petroleum Economist
Stuart Penson, Managing Editor, Hydrogen Economist
Mike Reed, Editor-in-Chief, Pipeline & Gas Journal
Moderator: Lee Nichols, Vice-President, Content, Gulf Energy Information

Key Takeaways

1. Trump's Energy Ramifications: The webinar explores the potential ramifications of President Trump's second term on global energy markets, focusing on the US emerging as a net energy exporter, evolving trade relations, and energy security.

2. Biden's Drilling Ban: Kurt Abraham discusses the impact of Biden's offshore drilling ban on the US upstream industry, highlighting significant oil and gas potential in areas like offshore Southern California and Alaska.

3. Oil Prices Impact: Paul Hicken emphasizes the importance of oil prices and capital discipline in determining US crude oil production growth under a Trump administration.

4. Midstream Industry Benefits: Mike Reed highlights the potential positive effects of a Trump administration on the midstream industry, particularly in terms of streamlining approval processes and softening regulations.

5. Increased LNG Projects: Paul Hicken predicts a significant increase in US LNG projects and export capacity under Trump, benefiting from a more favorable regulatory environment.

6. Hydrogen Sector Uncertainty: Stewart Penson notes the uncertain outlook for the hydrogen sector under Trump, with potential changes to the Inflation Reduction Act (IRA) impacting hydrogen projects.

7. Legal Policy Challenges: The panelists discuss the potential legal challenges and uncertainties surrounding the implementation of Trump's policies, particularly in relation to the IRA and renewable energy investments.

8. Tariffs and Clean Fuel: The conversation covers the potential impact of tariffs on oil imports from Canada and Mexico, the role of the Trump administration in the Middle East, and the future of clean fuel production tax credits under Trump.

Key Quote

Well, Lee, you know, I think in the short term it really won't make much difference from what we have going on at present. In the longer term, you do have to be concerned about how much resource potential is being shut off by this move about it. The Biden Group has put aside a little over 625,000,000 acres of offshore territory. Now if you consider that 640 acres comprise a square mile, that translates to over 976,000 square miles of the US offshore, right, The oil and gas exploration and development underway in the central and western Gulf of Mexico. But we also know that there still remains significant potential in two places in particular, offshore Southern California and offshore Alaska. We have estimates from the US Geological Survey. They say the total potential petroleum resource in the offshore Central California may be about 46 billion barrels and a trillion cubic and some of these oil reserves maybe 1 billion barrels. They should be produced by directional drilling from the existing platforms. So, you know, that's a point that I don't know that many people have heard about. Offshore Alaska, you've got an oil and gas potential estimated to be about 25 billion barrels of oil and about 124 trillion cubic feet of gas. Majority of Alaska's offshore potential is in the Chukchi Sea and the Chukchi Shelf within that sea and the Beaufort Shelf to the east provide those provinces contain about 90% of the undiscovered oil in offshore Alaska. As our industry continues to improve exploration technology, I'm thinking perhaps we might get find some more potential in other offshore areas around the country. But what's happened is Mr. Biden has an effect. Cut off that opportunity for now. You know, other than offshore northern Alaska. This is a sweeping ban and includes Pacific Coast along California, Oregon and Washington and includes 44,000,000 acres in the northern Bering Sea in far northwestern Alaska. In addition, the ban covers the entire US Atlantic Coast, so I might point out roughly 1/3 the eastern third of the Gulf of Mexico. The original quote. That's why the IPAA is calling this ban significant and catastrophic. We've had a condemnation of this action by the American Petroleum Institute, the National Ocean Industries Association, their president, Eric Milito, has said that the decision to unilaterally block the areas from future development is a strategic error. I might point out that Eric is also World Oil editorial advisor. So you've got NOY

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U.S. Energy Export Trends and Their Global Impact

Introduction

The global energy landscape is changing rapidly, driven by geopolitical shifts, technological advancements, and evolving market dynamics. One of the most notable developments is the emergence of the United States as a net energy exporter. This shift has significant implications for global supply chains, trade relations, and energy security.

U.S. Energy Export Growth

The U.S. has become a net energy exporter due to advancements in drilling technologies, increased shale production, and strategic policy decisions. This shift impacts global energy prices, trade flows, and geopolitical alliances. Increased U.S. liquefied natural gas (LNG) availability provides European and Asian countries with alternative supply options, enhancing their energy security.

However, regulatory changes, such as offshore drilling bans and environmental regulations, could affect production levels and investment decisions. For instance, the recent U.S. offshore drilling ban has raised concerns about the long-term availability of domestic resources. Market dynamics, including oil prices influenced by global demand and supply factors, also play a crucial role in shaping the future of energy production.

Midstream Sector Developments

The midstream sector, which transports oil and gas from production sites to end-users, is set for significant changes. Regulatory streamlining and infrastructure investments are expected to enhance the efficiency and capacity of the midstream network. This is especially important for the LNG sector, where the ability to transport natural gas to export terminals is critical for meeting global demand.

Hydrogen Sector and Carbon Capture

The hydrogen sector in the U.S. faces uncertainty amid potential leadership changes. The Biden administration has invested heavily in hydrogen, targeting 10 million tons per year by 2030 and allocating $8 billion to support regional hydrogen hubs. The future of these initiatives is unclear, especially with potential changes to the Inflation Reduction Act (IRA), which offers essential subsidies for hydrogen projects.

Carbon capture and storage (CCS) is gaining momentum in the U.S., supported by enhanced tax credits under the IRA. The country leads the world in carbon capture projects, with major oil companies investing in CCS to reduce emissions and explore business opportunities in carbon management. The future of CCS under a potential Trump administration is uncertain, particularly regarding regulatory support and tax incentives.

Upstream Oil and Gas Challenges

The upstream oil and gas sector faces its own challenges and opportunities. Despite a pro-drilling stance, several factors could limit a significant increase in U.S. drilling activity. These include uncertainties around oil prices, fiscal conservatism among operators, high equipment and service costs, regulatory burdens, and manpower shortages. Any growth in drilling activity is expected to be modest and gradual.

Pipeline and Trade Policies

The pipeline sector is poised for developments, particularly in the Marcellus and Utica shales. The authorization of the Mountain Valley Pipeline (MVP) and potential revisions to the National Environmental Policy Act (NEPA) could facilitate new midstream projects. Additionally, the appointment of North Dakota's governor as Secretary of the Interior may advance carbon capture infrastructure.

The imposition of a 25% tariff on oil imports from Canada and Mexico could significantly impact the U.S. oil industry. These imports are crucial for U.S. refiners, and tariffs could increase costs, leading to higher consumer prices for gasoline and other products. Finding alternative sources of heavy sour crude may be challenging, potentially increasing reliance on Middle Eastern imports and introducing geopolitical complexities.

A trade war with China, although U.S. oil exports to China are relatively small, could have broader economic implications. Trade wars typically reduce global economic growth and increase inflation, affecting various industries. For the oil industry, this could mean decreased demand for oil and petroleum products. Retaliatory tariffs from China on U.S. exports, such as polyethylene pellets, could further exacerbate the situation.

Tariff retaliation from Canada and Mexico also poses a significant risk. If these countries impose their own tariffs on U.S. exports, it could lead to an escalating trade conflict that harms both economies. The U.S. petrochemical industry, which exports significant quantities of polyethylene pellets, could be severely impacted by retaliatory tariffs, affecting profitability and disrupting global supply chains.

Conclusion

The evolving energy landscape presents both opportunities and challenges for stakeholders across the value chain. The United States' position as a net energy exporter, along with regulatory and market dynamics, will shape the future of global energy markets. Strategic investments in technology, infrastructure, and policy support are crucial for ensuring a resilient and sustainable energy future. Policymakers must consider the broader implications of tariffs and trade wars and seek solutions that promote stability and growth in the global economy.