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Between a rock and a hairpiece

America’s oil industry sees no love in Hillary Clinton’s green agenda but fears Trump’s populist bluster

Hillary or the Donald? If you’re an oil and gas executive or lobbyist, the contest that looks likely to emerge from the US primary season offers a dismal choice.

The industry has overwhelmingly supported the Republican Party in recent elections, and resoundingly backed the conservative Texas senator Ted Cruz in the Republican primary this year. (At the time of writing, Cruz still had a slim chance of overtaking Trump for the nomination.)

But a Trump presidency is not how most senior oilmen would have envisaged a Republican White House. If his campaign is anything to go by, unpredictability would be its hallmark. If his downright offensive – not to say racist and divisive – primary-season posturing offers a clue, Trump could be deeply disruptive for American business at home and abroad.

Hillary Clinton, ever the political tactician, might be harder to pin down – she has been highly pragmatic on energy and other issues – but in trying to see off Bernie Sanders’s challenge for the Democratic nomination she has been pulled to the left on climate change and fracking regulations.

In short, oil executives will struggle to find anything to like in either of the likely contestants’ platforms.

Unlike earlier campaigns – remember the chants of “drill, baby, drill” at Republican gatherings in elections past? – energy hasn’t really even featured much in this cycle. That’s a problem, because the next president will face momentous choices that will shape US energy policy for decades – from CO2 reduction to drilling regulations to taxes to international energy relations.

Here is how the candidates stack up.

Clinton: green warrior

At the start of the campaign, Clinton came under attack from the left of her party for her paltry greenery. But as the primary campaign has steamed ahead, she has steadily ratcheted up the rhetoric on emissions. She now puts cutting CO2 alongside clean-energy development at the centre of her energy pitch. Repeatedly, she has pledged to turn the US into “the clean-energy superpower of the 21st century”.

How would she do this? Clinton promises to slash CO2 emissions from 2005 levels by 30% within the next decade, beyond the 26% cut the US promised in the Paris negotiations, helped along by a massive roll out of new solar capacity and a new $60bn clean-energy fund. She supports president Barack Obama’s Clean Power Plan and would likely back a carbon tax if the idea gained support in Congress.

Clinton has also set an ambitious – if probably unachievable – target to reduce US oil consumption by a third in the 10 years after she takes office. Translated into policy measures, the target implies a further tightening of automobile fuel-economy standards, new efficiency standards in other sectors – say shipping and home heating – and more federal support for the electric vehicles.

The boldness of this plan has garnered surprisingly little heed. If even half Clinton’s target were reached, it would re-shape America’s energy market. Lopping off that much oil demand would have consequences throughout global oil markets. Consider that a 33% cut in demand would wipe 6m barrels a day from around 19m b/d now by the latter half of 2020s. Demand equivalent to the combined consumption of the UK and Japan – and then some – would vanish from the market.

Clinton’s fracking stance is another surprise for the industry. As Secretary of State, she was a strong backer of shale development and gas’s role in cutting CO2 emissions. She even launched an initiative to link US shale drillers with their counterparts abroad to spur exploration and development. But the campaign trail has changed her tune. “By the time we get through all of my conditions,” she said recently, “I do not think there will be many places in America where fracking will continue to take place.”

It’s a statement that, in tandem with the oil-demand goal and CO2 efforts, would leave some policy confusion. The US might slash its oil use (the 33% goal), but end up importing more (to make up for shut-in fracked tight oil), while emissions-belching coal stations thrive as (fracked) shale gas supplies dwindle. Huh?

But the electoral calculus for her new fracking position is straightforward for Clinton. A recent Gallup poll found the practice to be deeply unpopular with most Americans. Just 25% of Democrats and 34% of independents support it.

Cleverly, Clinton has not staked out a hardline position against fracking, leaving herself wiggle room on the issue if elected. Also, most fracking regulations take place at the state level, making local elections in places like Texas, North Dakota and Oklahoma more important on that issue. Clinton is also certainly aware of the crucial role fracking has played in America’s oil revival and pushing down fuel prices at the pump. That’s a legacy of the Obama years that Clinton would no doubt like to continue.

On the Arctic, Clinton has been clearer. She’s against it. With her in the White House, further bid rounds for offshore Arctic acreage would be highly unlikely – not that many firms are rushing north to hose cash in a high-cost region anyway. If oil and gas drilling is unlikely to flourish on federal lands under Clinton, those territories could see more wind and solar deployment.

Trump: wildcard

At least with Clinton the industry knows where she stands. By contrast, Trump is essentially a blank slate on energy policy and has shown little grasp or interest in the ins and outs of America’s energy sector. His website doesn’t include any energy plans and his campaign-trail comments on the topic – or lack thereof – pretty much sum up the policy vacuum.

Worryingly for the industry, he has echoed some anti-Big Oil criticisms typically heard during Democratic races. He has cast Texas senator Cruz as an oil-industry lackey for taking large campaign contributions from energy firms. He has also diminished Ohio governor John Kasich’s achievements by saying he got lucky by “striking oil”, a reference to the boom around the Utica shale discovery.

Trump has been an outspoken critic of efforts to cut CO2 emissions. He once tweeted that “the concept of global warming was created by and for the Chinese in order to make US manufacturing non-competitive”. (Someone should have told the Chinese.) He has also pilloried Obama for saying climate change was the greatest threat faced by future generations.

So it’s safe to say the Clean Power Plan would fall by the wayside if Trump were elected. A carbon tax, which many international oil companies have favoured, would also probably be a nonstarter – though as Donald himself likes to say “everything is a deal”.

Trump did shed a little more light on policy specifics in a survey response to the pro-industry group American Energy Alliance. It’s a mixed bag for the industry. Trump favours continuing the Renewable Fuel Standard, an oil-industry bugaboo that has helped carve out a space in the American fuel tank for ethanol. He also opposes selling off federal lands to the states and private companies, which many in the industry think would open more areas to drilling. Trump, a developer of golf courses, has put “maintaining the aesthetics” as a first priority for federal lands followed by “gaining revenue”. On the other hand, the industry will like Trump’s talk of broadly cutting back redtape and slashing taxes.

Internationally, a Trump presidency could wreak havoc with oil markets – though if you like risk-induced price rallies, he might be your man. He has promised to overturn much of the post-World War II security order – from Nato to the UN to nuclear non-proliferation to America’s alliances in East Asia and beyond. His Middle East policy, whether in Iraq, Libya or Syria, appears to centre around an ill-defined idea of “taking their oil”. His stance on Muslims – “Islam hates us”, he says, among a host of other comments that almost look designed to enflame things – might make for rather difficult diplomacy in the Middle East.

But that might not matter to him. Trump sees oil as a bargaining chip for furthering his foreign-policy objectives. He said he would cut off imports from Saudi Arabia if the kingdom didn’t pay more towards Middle East security. He says he would force China to cut the flow of oil to North Korea. But in Europe, he has criticised Nato allies of being soft on Moscow’s incursions into Ukraine because “they wanted the oil” from Russia. As for the US’ own stance on Russia – that presently includes sanctions against parts of its oil sector – Trump has been glowing in his admiration for Vladimir Putin. (The admiration seems to be mutual – Putin calls Trump yarkii, or dazzling.)

American companies would find it difficult to do business with Middle Eastern companies, if Trump came good with his plan to ban Muslims entering the US. At an industry conference in Houston in February, Oman’s oil minister Mohammed al-Ruhmy said, half-jokingly, he “might not be allowed to come back next year if Trump is elected”.

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