With the dust settling on the most unpredictable US election in generations, it feels good to take a breath and look at what the outcome means for the US and the world.
One way the US dictates global policy is energy, and I’ve been thinking about what a Joe Biden presidency will mean for the sector. There are big differences between what Trump has done and what Biden plans to do. But intriguingly, there are more similarities than you might expect.
When he was campaigning against an upstart called Barack Obama back in 2008, the Republican nominee, John McCain, said: “Whoever controls oil controls much more than oil.”
This thought has been central to US energy policy for decades, with president after president setting out their plan for the US to become less reliant on overseas producers and, ultimately, achieve self-sufficiency. And whatever you think of Trump’s tenure, he has achieved it, with the US now the world’s largest energy producer, surpassing Russia and Saudi Arabia in oil production whilst becoming a net exporter of oil.
This is a remarkable achievement, but some of the credit has to go to the man who looks set to replace Trump as president. Biden served in an Obama administration that oversaw a historic surge in oil and gas production which allowed them to be freer with their foreign policy. Trump used energy independence as a policy lever, too, and Biden will do similar in the coming years. Biden isn’t going to turn his back on old energy. He knows it’s too important for that.
As an example, Biden won’t end fracking, which has helped pave the way to US energy independence, and he will not diminish oil and gas production. He may increase regulation, but Biden’s approach (for now, at least) to old energy looks quite similar to Trump’s.
Biden’s energy policy does diverge from Trump’s on green energy, with climate change at its heart. Trump described Biden’s approach as “radical” and, to be fair, it does look like the most aggressive climate policy that the US has ever seen from a major party candidate. $2tn will be spent on infrastructure, electric vehicles, renewables, agriculture and conservation. Biden used this expenditure as a central plank in his election strategy to fire up the young vote.
One early action point for a Biden administration will be to rejoin the Paris Climate Agreement. Trump pulled the U.S. from the accord this week and Biden’s commitment to rejoining will be one of the most obvious diversions of their approaches. Biden stated on Twitter this week:
In the long term, Biden wants the US to move towards using 100% clean energy and zero emissions by 2050. European oil companies are already implementing strategies for an energy transition. US oil majors like Exxon and Chevron have remained focused on the traditional energy business and they’ve been sheltered by Trump. Biden will put a little more pressure on them to become greener quicker, but change isn’t going to come overnight.
At heart, Biden is a pragmatist, knowing the importance of US big energy in terms of productivity, corporate activity, employment and international sway. He misspoke at the last televised debate about his energy policy, saying that he would, “transition away from the oil industry.” Trump and his allies seized on this as being a red flag for the US energy industry.
But Biden’s actual position is more nuanced and long term. “Transition” is the key, and it’s not a transition that will be instant. And whilst Trump supporters claim that his energy policy would drive out jobs and hike prices, Biden’s camp point to the enormous investment that would be made into the green sector.
How the US approaches energy in the coming 4 years will significantly impact the way that it engages with the rest of the world. Trump’s policy of “Energy Dominance” pulled the US from the Paris Climate Agreement and sanctioned OPEC members Iran and Venezuela for long periods during his presidency, putting pressure on global energy supplies. In contrast, Biden will seek multilateral diplomacy, which will allow Iran, and perhaps Venezuela, to start pumping again.
A fascinating element will be the relationship that Biden builds with Mohammed Bin Salman, Crown Prince of Saudi Arabia. Trump has done all he can to develop a friendship with the world’s most influential (and controversial) member of the oil market and OPEC, but it’s likely that Biden will prefer to concentrate his energies more on policy than befriending dictators.
And whilst the US has made great strides to be energy self-sufficient, there will always be a reliance on the Middle East. US presidents need affordable fuel for consumers and for that they need a middling oil price. But Biden will need a price high enough to make green alternatives competitive in support of his ambitious climate plan. So he’ll need friends in the region.
A Biden administration will make a lot of hot air around its plans to invest heavily in green, but in order to bring these ambitious plans to life it will still have to rely on old energy to get there. So, whilst it might not look like a Trumpian energy approach, below the surface, for the short term at least, the two policies aren’t all that different.
Posted on 11/12/2020 7:54:49 AMEarlyBird News