US Elections

United States elections are now approximately six months away, and time has an interesting way of passing quickly, particularly when some of the months include a summer holiday period. So, it is not too early to start thinking about the impact of the upcoming US presidential election on the global energy markets.

Over the past decade, the US has become an important producer and exporter of both crude oil and LNG. Accordingly, US energy policy, now more than ever, impacts the global energy market. Currently, the polls indicate the presidential election is extremely close; however, Trump appears to be leading in several key swing states. With several more months before Americans head to the voting booths, it is too close to call, and some event or issue (e.g., the crisis in Gaza, Trump’s legal challenges, the economy/inflation, rights of women, etc.) could materially shift the current polling.

However, we thought it might be interesting to play the “what if” game: one in which President Biden wins reelection and another in which Trump secures a second term.???

If President Biden wins reelection, we anticipate a continuation of current administration policies. Despite rhetoric supporting sustainability and the passage of legislation supporting renewables (the Inflation Reduction Act), US energy production has expanded during Biden’s term. Presently, both crude oil and natural gas production are at or near all-time highs. This is principally driven by the marketplace and demand. However, due to a change in priorities, a renewed emphasis on financial discipline and a desire to deliver improved financial results to investors, along with uncertainty about the future regulatory environment, US producers have limited capital expenditures, opting instead to implement a consolidation strategy focused on acquiring smaller players. By way of example, ExxonMobil’s capital expenditure remains significantly below pre-COVID levels.

In a Biden second term, we would expect his administration would continue to try and balance the desires of environmentalists and consumers. A good example is the Biden administration’s announcement in January halting all approvals for pending and future applications for new LNG projects. A cynic might say this was timed for the election – to gain the support of environmentalists/greens. Presently, the US has several projects that have been approved and are being built and also approved and have yet to start construction – none of these projects would be impacted by the announcement and would ensure expanded exports into early 2026. Moreover, we expect that after the election, the Biden administration will quietly roll back this moratorium on pending LNG projects, understanding the importance of US LNG exports to Europe as a replacement for Russian piped natural gas. In short, we would expect Biden to continue supporting renewables while encouraging conventional producers due to a need to keep energy prices low. Low energy prices mean lower inflation and happier American consumers. However, in such an uncertain and opaque environment, it is not certain US producers will continue to make the necessary investments to maintain or grow the level of production. In our view, in this policy environment, it would be difficult for the US to maintain, no less materially expand, current production levels.

If Trump were to win the election, we would expect a dramatic change in US energy policy. A Trump administration would most likely deemphasize renewables and, to the extent possible, attempt to roll back Biden’s legislation supporting sustainable energy and efficiency. Moreover, we expect a second Trump presidency to eliminate a broad swath of regulations applying to the domestic energy industry and open up more government lands for development. In short, we would expect a “drill baby drill” policy and all that comes with it. This change in policy will undoubtedly persuade some producers to lift their capital expenditures and production. However, it is far from certain that producers, on the whole, would take this as an “all clear signal” since new projects take time (typically years) to bring to market, and the future may look significantly different.

Moreover, should Trump implement an “America First” policy, raise existing or implement new trade tariffs, and apply greater pressure and sanctions against Iran, Venezuela and others, this will negatively impact both global trade and energy markets.

In short, the energy policies of the two presidential candidates differ greatly. This stark divergence in policy will add uncertainty to the global energy market as it attempts to handicap the likelihood of either a Biden or Trump win over the coming months.