What else to write about this week than President-elect Donald Trump? Just hours after one of the biggest electoral upsets in political history, analysts were scrambling to decipher what it might mean for the energy industry.
Writing back in June, all I was able to conclude from the Republican candidate's ill-defined statements was that under a Trump presidency, "something is going to change ... we just don't know what." Now it is time, in this brave new world, to work out the "what."
Global oil prices, much like the rest of us, could not really work out how to react to Trump's victory. They began by dipping and then reversed and climbed as oil stocks were buoyed by expectations that a "friend of the industry" would be entering the Oval Office.
Winners and losers
Fossil fuels — both hydrocarbons and coal — are widely seen as the "winners" in this election. Trump's platform of "making America great again" was underpinned by the explicit pursuit of energy independence for the U.S. Trump energy advisor Harold Hamm (more on him later) told Republican crowds that "every time we can't drill a well in America, terrorism is being funded."
If Trump follows through on his promises to reverse President Barack Obama's legacy, the Clean Power Plan will be shelved, as will a number of water regulations that are being fought in court by oil and gas companies. This will clear the path of burdensome regulations for energy companies to get drilling and will release the pressure on utilities.
His flagship proposal was to get the Keystone XL pipeline back on track, although how Trump plans to "get a piece of the profits" from the pipeline for the U.S. remains unclear. Canadian Prime Minister Justin Trudeau — despite clear differences of opinion with Trump on a raft of issues — has diplomatically invited Trump to discuss the the future of their partnership.
The outlook for renewable energy is quite different. The fate of Obama's solar investment tax credit (ITC), up for renewal at end of 2019, looks decidedly gloomy. Activists gathered in Morocco for a climate change conference as the election unfolded understatedly described Trump's election as a "bump in the road" for the transition from fossil fuels to renewables. Nov. 9 was a bad day too for renewables entrepreneur Elon Musk, as stocks in SolarCity and Tesla tumbled.
Whether Trump — who "believes in weather" rather than climate change — will withdraw from the Paris climate change agreement or simply render it powerless by refusing to comply, remains to be seen. The open question is how the U.S. stepping back from its leadership role on climate change will affect the level of commitment globally.
But analysts have warned that underlying fundamentals like the rapidly falling prices of solar panels and the rapid development of new technologies, will mean he is unable to halt the march of renewables growth despite the withdrawal of federal support.
Recruiting to the Trump court
The first signal of what Trump's energy policy might look like may come from the appointment of his Energy Secretary.
The Washington rumor mill has suggested that eccentric Oklahoma oil man Harold Hamm is the front runner. The wildcard candidate — he has been described as "the Donald Trump of the oil patch" — has no political experience and has been advising Trump on energy for months.
However, if we see a more cautious Trump in office than on the campaign trail, he might instead try to persuade Kevin Cramer to take up the post. But Cramer sounds cool on the idea, preferring to remain in North Dakota as a Congressman, saying "it would be a tough call to make."
Behind the scenes, Trump has more controversial characters like Myron Ebell, who has campaigned vigorously against climate change "alarmism," leading transition plans for the EPA.
The Hamm-Cramer debate will depend on how the Trump we recognize from the election campaign transitions to real administrative duties. Will he play it safe? Or will he continue to break the mold with his key appointments?
The international dimension
As U.S. president, Trump will still not have his hands on all the levers of a globalized energy industry, nor will the effects of his policies be confined to the U.S.
In three weeks, OPEC will meet in Vienna to decide on their next move following output cuts that have caused global oil prices to climb above $50 in October. Their attempt to prop up falling oil prices just got a lot more complicated, as Trump promises to release millions of barrels of American oil onto an already oversupplied market, and to implement protectionist trade policies that will hit emerging markets hard — the strongest source of global demand.
Conclusion
Trump's team will have to set about working out how to turn some of his more outlandish claims into reality. He has promised to produced "millions of jobs" in coal, despite declining market demand. Expectations are high, but Trump does not have his hands on all the levers. Both global geopolitics and state-level regulatory power dilute his influence.
The problem with Trump's vague energy proposals is that voters, for whom energy questions came relatively low on the list of concerns after hot-button issues like immigration and healthcare reform, paid even less attention to policy details than in other areas.
It will likely take some time for the Trump administration to get around to tackling the energy industry. However, at some point they will have to start shaping policies that work for those who voted him into office.
