ENERGY OUTLOOK

OIL IN THE TRUMP ERA

Praveen Jaiswal gauges the likely impact of future US energy policy

It seems like everyone is talking about ‘The Donald’ these days. We are aware of his stance on immigration and where he stands on dealing with the media. And as President of the United States of America, there are also questions that only Donald Trump can answer.

Will he really build the wall? Is he conservative or opportunistic? What would his approach be towards energy and the environment?

These questions may seem simple and straightforward; but the answers are complex, and can have far-reaching consequences for global geopolitics.

Trump’s energy policies can be summarised by taking a cue from his election campaign addresses. As we’re yet to witness any definitive communication especially with respect to energy policy, we might witness the following changes that may impact energy production and use, and the world economy in the foreseeable future.

Ex-president Barack Obama’s clean power plan may take a hit. Although the Trump administration might take steps to reduce carbon dioxide emissions that cause global warming, expensive top-down restrictions are an unpopular prescription. We might witness alternative policies that address carbon dioxide emissions in a more affordable, fair and free-market manner.

As a result, we could expect the Trump administration to open more state land for energy production that would increase domestic oil and natural gas production. This will reduce energy prices and boost the American economy. And the decision will have a far-reaching impact on the influence of the Organization of the Petroleum Exporting Countries (OPEC) as a collective.

And it certainly sounds good for oil-importing countries such as ours.

As for alternative fuels, coal is likely to receive a reprieve and unlikely to be saddled with any new environmental restrictions under the Trump administration – unlike the severe restrictions under the previous government.

On the other hand, the wind power industry can expect harsh measures especially for the killing of birds, and endangered and protected species. The Trump administration may hold the wind power industry accountable for the environmental protections that apply to everyone else, thereby withdrawing the special status wind power producers have enjoyed.

We shouldn’t be surprised to witness a reduction in subsidies for the wind and solar industries, which will create a level playing field for competing energy sources.

Much is being said about the merits and demerits of the use of ethanol and how much of it can be blended into gasoline. Research has proven that ethanol is in many ways worse for air pollution and the environment than gasoline.

The Obama administration increased the quantity of ethanol that could be blended into gasoline, and we can expect the incumbent to take a hard look at ethanol – and in fact, consider rolling back the mandates enjoyed by the ethanol lobby.

Similarly, nuclear energy may be subject to streamlined laws with respect to storing spent nuclear fuel. Expect the Trump administration to prioritise the removal of government obstacles to new nuclear power designs, which coincidentally would provide more emissions-free power.

Trump’s plan for energy dominance is rightfully causing anxiety among people who believe that renewable energy is the foreseeable path forward to reduce society’s dependence on fossil fuels. It is likely to cause even more fear among people who are betting on fossil fuels to continue dominating the world economy and geopolitics. Trump’s campaign statements have promised to work on removing barriers to increasing supplies.

An energy expert once noted that “oil fuels more than automobiles and airplanes. Oil fuels military power, national treasuries and international politics… [It is] a determinant of well-being, national security and international power for those who possess [it], and the converse for those who do not.” Trump seems to have fully absorbed this line of thinking.

“American energy dominance will be declared a strategic economic and foreign policy goal of the United States,” he has declared in the past, adding: “We will become and stay totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.” And Trump seems to be convinced that the accelerated extraction of oil and other carbon-based fuels will ‘Make America Great Again.’

These statements briefly underline his energy policies and we can expect them to have a far-reaching impact on the rest of the world.

While these assumptions and expectations are largely based on Donald Trump’s campaign rhetoric, many believe it would be ‘business as usual.’ Critics also claim that once he assumes office in its fullest form, he would adopt a more pragmatic approach.

However, amid brewing tensions with Iran, volatility cannot be discounted. Increased supplies, a strong US Dollar and subdued demand will put pressure on oil prices in the short term, which is a positive for oil-importing nations.