US Foreign Policy – Energy impact
Likely to focus immediately on repairing relationships with allies and bringing them onboard on various foreign policy initiatives including Iran, Venezuela, China, and Russia. A return of Iranian barrels is more likely under Biden, although we do not expect a meaningful return before 2022.
Exports of LNG and crude will be pushed as a trade balancing mechanism in Asia and Europe.
Multilateral approach to trade and other global partnerships, with less friction with a host of key trading partners (Latin America, EU, China).
Subsidies and tax changes will be deployed to promote fossil fuel development; and
Regulatory focus will tighten and favor oil and gas majors over independents, given additional costs involved in limiting flaring and venting from both fields and pipelines.
Remaining federal incentives to promote renewables will be cut back or eliminated altogether.
Policy will shift towards additional deployments of renewables and batteries at the expense of fossil fuels in power generation.
The near-term impact on US oil and gas supply is largely limited regardless of election result, as significant permits and drilled but uncompleted wells, or DUCs, provide a cushion in the event of a ban on new federal drilling permits.
Drilling on federals lands will be reviewed along with current oil and gas tax provisions, with rollback of Obama-era methane regulations, or even the implementation of tighter regulations on existing, not just new, (stripper) wells.
A second Trump administration is likely to maintain the status quo in terms of oil and gas tax provisions, so as not to create further headwinds for an industry already struggling from weak commodity prices.
Near-term impact on US oil and gas supply is largely limited regardless of the election result, as significant permits and DUCs provide a cushion in the event of a ban on new federal drilling permits.
A return of Iranian barrels is not out of the realm of possibility but risks of missteps and tensions in the Middle East are heightened.
Increased underlying cost of US natural gas (and therefore raising the cost of US LNG) through a number of likely executive orders, which would be aimed at lowering methane emissions and banning new oil and gas leasing on public lands.
Reduced risks that federal regulations will start to assess full life-cycle costs, which would include upstream carbon emissions and methane leakage associated with new LNG export projects.
Risk of additional trade tensions with key Asian demand countries, namely China, which could impact ethane, LPG, ethylene and polyethylene trade.
Midstream sector investment moves toward CO2, H2, but construction would likely occur after the upcoming term. US ethylene cracker investment Wave 3 would be at risk.
Wave 3 of US ethylene units would likely proceed. Thus, anticipate no change to potential relaxation of regulations on single-use plastics and recycling.
Single-use plastics and recycling would move to the fore, with potential for more regulations on single-use plastics and encouraging of recycling.
Renewables & Climate
The opportunity to defend reversals of Obama policies in court.
Re-engagement with Paris Climate Accord. However, comprehensive climate proposals (including targeting decarbonized power sector by 2035) depend on US Senate makeup and the relative importance of other (non-energy) policy priorities.
Likely means imposed Section 201 tariffs on imported solar module tariffs in 2018, as well as work to extend and even increase the magnitude of those tariffs.
Work to reverse the Trump administration’s rollback of Obama-era regulations (Congressional Review Act could give quick wins). The EPA would approve California waiver, allowing it to set tougher-than-federal clean air standards — which other states can then follow to set vehicle policy.
Continued slow-walking of offshore wind permitting; potential use of CFIUS rules to block offshore wind deals involving foreign state-owned companies (Equinor, Orsted, etc.)
The extension of Wind Production Tax Credit and Solar Investment Tax Credit, continued support of CCUS– which have historically been bipartisan.