Trump's Energy Policy: Boon for the Oil Industry or Non-Event?

Stock SectorMay 25, 20184min12

WASHINGTON, DC – JANUARY 24: US President Donald Trump displays one of five executive orders he signed related to the oil pipeline industry in the Oval Office of the White House January 24, 2017 in Washington, DC. President Trump has a full day of meetings including one with Senate Majority Leader Mitch McConnell and another with the full Senate leadership. (Photo by Shawn Thew-Pool/Getty Images)

The rhetoric of the Trump administration is certainly pro-oil industry. This can be seen in the recent National Security Strategy and the President’s remarks at the June 29 Unleashing American Energy Event. However, there have been opinions that the Trump administration’s actions have had and will have at best a minor effect, with some authors saying the policies “will provide marginal support for increased growth of oil and gas output” and “Trump’s energy plan isn’t a game-changer.”

To assess the effect of the administration’s policies, one must weigh the impact of numerous individual actions, for example, executive orders, legislation and changes in regulatory practices. I find it convenient to look at these as grouped into three categories: actions specifically targeting the industry, environmental regulations that affect industry demand or costs, and general actions that nonetheless have a significant effect on oil and gas. The latter include lower corporate taxes, tariffs and withdrawal from the Iran nuclear deal.

Actions specifically targeting the oil and gas industry

These numerous actions are almost all positive for the industry. They include opening additional lands for leasing, reduction in Outer Continental Shelf royalties, expediting environmental review of the Dakota Access and Keystone XL pipelines and rollbacks of Obama era fracking and methane emissions rules.

These actions benefit and are welcomed by the oil industry, however, the majority of the new acreage is not economically attractive with current oil and gas prices, and the prospectiveness of the Gulf of Mexico shelf is limited even with lower royalty payments.

Easing the rules and expediting regulatory procedures are certainly benefits. As the articles cited above point out, these effects are small compared to the effects of improvements in technology and higher oil and gas prices.

In addition to their practical and monetary effect, Trump’s positive view has raised the spirit of many in the industry.

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