WHAT WILL A BIDEN PRESIDENCY MEAN FOR OIL? BY BORIS IVANOV

Joe Biden has turned his commanding lead in the US polls into an election victory. The 46th presidency looks set to have far reaching consequences not just for the oil and gas industry, but for the entire energy sector.

Not to be understated, Biden’s proposals for the sector are set to bring about the most significant changes to the US offshore industry in its history.

On energy policy, the two candidates that ran for office could not have been further apart. Trump, who proclaimed an era of American ‘energy dominance’ back in 2016 took the US out of the Paris Climate accord and aggressively rolled back Obama’s climate-change-mitigation policies. On the domestic front, he was aggressive when it came to deregulating the environment and energy sector, pursing the rollback of hundreds of rules in areas such as fracking and methane. Fifteen states are also now suing the Trump administration for opening Alaska’s Coastal Plain up to oil and gas leasing in 2017, which they regard as a violation of environmental laws. The different difficulties faced for a state like Alaska is that nearly 85 percent of its state budget is dependent on oil revenues.

In contrast, Biden has earmarked $2tn in green energy spending for his first term. The investments dovetail with his economic plan to create jobs in manufacturing ‘green energy’ products and focus on a climate policy designed to supercharge the economy out of its pandemic-era recession. Some commentators have suggested though that this will mark the beginning of an ‘offensive’ on the fossil fuels industry.

In normal times, a campaign like this might have been viewed as self-destructive during an American election, with so many states dependent on the oil industry for jobs and the economy often polling as voters’ number one priority when choosing a candidate. Yet, this election was not fought in normal times and it was made possible by several factors. Most obviously, the devastating pandemic that had delivered a costly blow to the economy, the oil and gas industry, and the viability of new projects. A Green New Deal is suddenly an appealing stimulus package at a time when clean-energy costs are falling drastically, and technological progress is advancing extremely quickly. The USA does not like to be left behind.

For the first time, an election looked like a binary choice for the energy sector. Critics, including Trump, argued that Biden’s plans lacked clarity. More likely, the Biden campaign weighed the political gamble involved with introducing climate change policies and the possibility discussion would naturally become one about local industry and job losses. Upstream producers have also spent billions on exploration and development projects, the value of these ventures could be eradicated by Democrat policy and then litigation becomes a real possibility.
Some of the pledges from the Biden campaign include a target of net-zero emissions by 2050 and to ‘decarbonize’ the US electricity sector by 2035. This would involve installing a vast network of charging points for new cars and electrifying the US’ transportation sector. One standout policy is the deploying utility-scale battery storage across the US, which would enable power system operators and utilities to store energy for later use. This would be a key component to maximize the benefits of the installation of thousands of wind turbines, millions of solar panels, and the plans to double offshore wind capacity by 2030.

While worries in the oil and gas industry grew as the climate debate became increasingly polarized between the two candidates, Biden’s plans also included a policy that may alleviate some industry concerns: The extremely expensive process of carbon capture and storage which is currently attracting huge amounts of climate-related investment. These machines serve a single and simple purpose: to remove carbon dioxide from the air through direct air capture. Biden’s camp has committed to research in the technology, not only as a mitigation tool for climate change, but because carbon capture proved a useful campaigning tool. It would guarantee the oil and gas industry’s role in the US and helped Biden avoid tricky questions on fracking, from regions where Trump may easily collect votes. As things stand, Biden’s plans do not include any bans on industries like fracking, but his rhetoric may be equally effective if his words frighten off investors.

It may not come down to voters. Even if energy policy is overlooked, investors have a watchful eye on the White House and will be aware of the changing tides. Investors are the driving force of the industry and individual states have also been pursuing their own agendas for some time. California, for example, is the US leader in solar power, with 18 per cent of its electricity generated from solar in 2019. Whatever outcomes emerge from Biden’s Green Deal, the greater consensus driven by corporates, investors, campaigners, and the wider population may result in stronger action, even when the policy prescriptions are still heavily debated.

This US election offered two extremely contrasting views on the future of energy, and its outcome is likely to influence global energy decisions the world over.

GPB GLOBAL RESOURCES B.V.
Boris Ivanov is the Founder of GPB Global Resources B.V. An international group of companies, engaged in petroleum and mineral resource projects, in various parts of the globe including Africa and South America.
For further information please visit: https://gpb-gr.com/about-us/