It is no secret that outgoing US President Donald Trump during his tenure had an extraordinary impact on the global oil market. From crippling the oil exports of Iran and Venezuela, to taking credit for brokering the biggest-ever voluntary production cuts, his fingerprints are all over.
Now the world is hoping that the situation in the sector will take a different shape after the landslide victory of President-elect Joe Biden, but the world should not expect a miracle change overnight on easing sanctions on either Iran or Venezuela..
The accomplishment of opening more leases and expanding offshore oil and gas drilling may not be all it seems. Less than 1% of the Gulf of Mexico blocks offered for lease attracted bids in the six completed sales so far during Trump’s presidency, according to documents posted on the Department of Interior’s website. Results of the seventh sale are due to be announced in December.
It is widely believed under Joe Biden the energy sector will certainly see changes for domestic energy companies and policy. The Democratic Party-led government will hopefully return to the importance of climate issues. The Biden administration would require aggressive methane pollution limits for new and existing oil and gas operations. Moreover the machinery should focus on the arrangement for permanently protecting the Arctic National Wildlife Refuge and other areas.
It should also concentrate on banning new oil and gas permits on public land and water bodies. It is hoped that Biden as per his election manifesto will modify royalties to account for climate costs.
Contrary to what Trump has claimed, Biden’s platform does not include a ban on franking the process of fracturing tight rock formations by pumping water, sand and chemicals into them under high pressure in order to extract gas and oil.
Biden and his cabinet might face a landscape where both domestic and global reserves of oil and gas are the highest they’ve ever been. At a time when most forecasters see a peak in oil use by 2040, known reserves are sufficient to maintain current production levels for another 50 years.
Neither the U.S. nor the remaining parts of the globe at large have a shortage of already-discovered oil under the ground. But both are clearly facing a shortage of pristine wilderness.
Shift in White House policy toward tackling global warming may impact oil and gas employment. But a green energy program could utilize the skills of laid-off oilfield workers — whether that’s supporting offshore wind farms or plugging the 3 million or so abandoned U.S. oil and gas wells that are leaking copious amounts of methane, a powerful greenhouse gas, into the atmosphere.
The Trump administration’s policy to pressurize Iran has halved the oil production of Iran and almost deadlocked most of its exports. Its shipments of crude and refined oil are now limited with few countries like China, Syria and Venezuela, while a meager amount of oil products were possibly smuggled to some other countries.
Sanctions on Venezuela have helped to drive production in what was Latin America’s biggest oil producer down to its lowest level in nearly 100 years, according to a published document.
Producers in the Organization of Petroleum Exporting Countries (OPEC) and their allies would have had a much harder time trying to balance oil supply to the pandemic affected economy to meet up the demand, though these two countries continued to pump 5.8 million barrels a day when Trump took office.
Under Biden, bringing the US back into the Iran nuclear deal is a policy goal, but it may not be a priority of his agenda. What is more likely is that both sanctioned countries would test US resolve to police its current restrictions. A Biden presidency probably could not let either country flout them without losing leverage. It would be much harder, for example, to bring Iran back into full compliance with the nuclear deal if it could already export the quantity of it wanted.Trump has sharp eyes on what OPEC is doing. He swung from Twitter diatribes against the organization and its allies to help broker their biggest ever output cut earlier this year. He was pushing on an open door — OPEC’s de facto leader Saudi Arabia and newfound OPEC+ ally Russia had already realized the error of letting their earlier cooperation collapse.
Biden may not have influence as much as we contemplated on OPEC. He already hinted that he intended to be stricter in his foreign policy with Saudi Arabia and in other countries who violated human rights day and night. This policy in return may act as a reward for him to get some friends on the Arabian Peninsula.
But history is on America’s side, at least from the oil perspective. The US is far less dependent on Middle Eastern oil than at any time since the mid-1980s. And OPEC+ oil producers need to keep prices high enough for their own economic needs, so they are likely to keep managing supply even without exhortations from the White House.
The writer is the past Bureau Chief of Reuters. He may reached at: [email protected]