Big Oil will get a bigger voice under Trump
Oil's stock is on the rise in Washington DC as industry backers prepare to take the reins of power
After eight years on the outside looking in during the Obama years, the oil business will be among the most prominent voices in Washington DC as president-elect Donald Trump stacks his incoming administration with industry stalwarts.
For the Department of Energy (DoE), Trump has tapped Rick Perry (pictured), a strong industry backer during his time as governor of Texas and brief runs for the White House (though more Americans will probably recognise him from his stint on the reality TV show Dancing with the Stars). Perry famously pledged to eliminate the DoE in a Republican primary debate - but forgot the name of the department. He probably won't seek to axe it completely as secretary, but he might downsize its ambitions, especially around investment in clean energy and efficiency. His appointment also breaks from the more recent tradition of putting trained scientists at the head of the department, which spends most of its time and effort on managing the country's nuclear-weapons arsenal. In Perry, who sits on the board of pipeline builder Energy Transfer Partners, the department will get a more forceful public advocate for the oil and gas industry.
It's a similar story at the Environmental Protection Agency (EPA). Trump wants Scott Pruitt, a forceful critic of the agency, to run it. He too has called for the government body he may soon be running to be scrapped. As attorney general in Oklahoma, a major oil producer, he led a string of legal battles against the EPA over the agency's efforts to regulate carbon emissions and a range of other federal environmental regulations. Pruitt, who has said he doesn't believe in the science behind climate change, also has deep ties to the oil and gas industry. Continental Resources' chief executive Harold Hamm was a key backer in Pruitt's campaign for attorney general. Pruitt has backed oil-industry opposition to the renewable-fuel standard, which reserves some of the American gas tank for ethanol. Weakening or killing off those ethanol requirements would boost US crude and gasoline demand.
For his man at the Interior Department, Trump has nominated Ryan Zinke, a strong advocate for more oil and gas drilling and coal development on the federal lands he will now manage. Zinke will almost certainly push to ease rules for drilling on federal lands and seek to open Atlantic and Arctic waters to more drilling. It won't necessarily make a difference - firms haven't shown great appetite to expand operations into these areas with oil prices around $50 a barrel and natural gas struggling to stay above $3 per million British thermal units.
ExxonMobil's chief executive Rex Tillerson is Trump's highest-profile pick from within the industry's orbit. It was a startling choice for Secretary of State. Tillerson faces a tough confirmation fight in the Senate: suspicions of his close ties to Russian leader Vladimir Putin, a relationship cultivated over the years to win access for Exxon to the country's vast Arctic and shale reserves, are rife. If Tillerson is confirmed, he will play the lead role in improving ties with Moscow, a top foreign-policy priority for Trump. That means Tillerson could lead negotiations to end economic sanctions on Russia. That would be a boon not only for ExxonMobil but other producers and service companies, like Halliburton, that have the technology Russia needs to unlock its shale and arctic resources.
Tillerson would also have much sway over the US' role in the Middle East. Exxon holds large assets across the region and previously defied the State Department by signing an upstream deal in Iraqi Kurdistan. Trump has relentlessly criticised the deal President Obama struck to restrict Iran's nuclear programme. That means Tillerson could be the man to end the rapprochement, damaging the hopes of international oil companies (but not Exxon) seeking a return to the country.
The industry will hope Tillerson can soften some of Trump's rhetoric - and maybe even affect policy - on trade. Tillerson, like all international oil executives, has been an unabashed advocate for free trade and would be expected to try to open new markets for America's expanding oil and gas exports. His new boss, though, has run on a protectionist platform that threatens to spark trade wars and disrupt established global energy-trade routes. For instance, Trump wants to kill the Trans-Pacific Partnership trade deal. It would have eased access to crucial Asian markets for American liquefied natural gas.
While Trump heralds a new era of influence in Washington DC for America's oil industry, it's far from a guarantee that Big Oil will run amok over policy. Lobby groups like the American Petroleum Institute will be able to push their policy priorities to the top of the agenda, and the industry will avoid the more stringent federal environmental regulations that would have come under a Hillary Clinton administration. And the tone will certainly feel more reassuring to Houston. But in a business driven largely by commodity prices and state-level regulations, Washington will remain a mostly marginal player in America's oil industry.