Energy Investor Monthly – October 2024

INSIGHTS OF THE MONTH

He Said, She Said: A Comparative of Presidential Candidate Energy Policies

As we head into the final week of the current presidential election cycle, along with all its rhetoric and seemingly endless analysis by policy wonks and political pundits, we thought it would be helpful to compare the energy policies of each of the two presidential candidates, with a particular focus on how they could impact the development, production, domestic and international transportation, and consumption of U.S. oil and natural gas. To be clear, this is not intended as an endorsement of either Presidential candidate, but instead, it is an assessment of each of their stated energy policies.

Former President Trump (R)

When it comes to national energy policy, the goals of Presidential candidate and former President Donald Trump are fairly straightforward. As laid out in his Republican National Conference (RNC) platform, it would be his 2nd administration’s intended goal to make America the world’s number one producer of oil and natural gas. In fact, this “drill, baby drill” policy is the first item listed in Chapter 1 of the RNC platform, indicating that “unleashing” America’s energy potential would be a top priority for the new Trump administration.

Examining U.S. production growth of the past two administrations, during former President Trump’s first term, U.S. oil and gas production (in thousands of barrels of oil equivalent, or mboe) rose from 22,563 mboe in 2016 to a peak of 29,961 mboe in 2019, a 33% increase. A likely reason why production peaked prior to 2020 can be explained by the COVID-19 epidemic – during which a significant volume of U.S. energy production was halted in anticipation of a drop in demand. In contrast, according to the Department of Energy (DOE) data, U.S. oil and natural gas production rose only 13.5% during the first 3 years of the Biden administration.

To further “unleash” America’s oil and natural gas production, Chapter 3 of the RNC platform clearly spells out the intentions of a future Trump administration. Although this section of the RNC platform outlines a plan to reduce government regulations across the entire U.S. economy, Item 4 explicitly addresses a reduction in the complex and often contradictory rules related to oil, natural gas, and even coal production. In theory, reducing regulatory hurdles across all parts of the U.S. economy, including fossil fuel production, would help drive both energy demand and supply, including fossil fuel consumption. This reduced regulation policy is also mentioned again in Chapter 4 of the RNC platform, which cites higher energy production as a way to lower everyday costs for all Americans.

As a final point, the Trump campaign lays out additional platform details in Chapters 5 and 10, primarily aiming to return America to its prior status as the world’s premier manufacturing superpower. However, to achieve this goal, the U.S. would need to significantly increase its total energy production, including oil and gas. Assuming that any future Trump administration pursues its stated “all of the above” objectives, oil and natural gas would play a key role in any national energy policy.

Vice President Harris (D)

In contrast to former President Trump’s energy policies, Vice President Kamala Harris’s stance on energy policy is less clear. However, providing some accommodation that she has only been the presidential candidate for her party since late July, her official website was only recently updated to reflect her stance on several energy issues. More specifically, her platform states that VP Harris seeks to “lower energy prices for all Americans while simultaneously fighting climate change.”

VP Harris’s platform further mentions standing up to “Big Oil,” which she claims she successfully did as Attorney General for The State of California, along with her continued support as both Senator and Vice President for the policy recommendations of the United Nations Climate Change Conference or Conference of the Parties (COP28). VP Harris’s previous campaign statements along with her official platform website, indicate that she has a more favorable view of renewables, particularly wind and solar, when it comes to defining her national energy policy. Her campaign also mentions that since 2019, the U.S. has produced more energy than it consumes from all sources. As seen in the U.S. Energy Information Administration (EIA) graphs below, oil and natural gas have been the most significant contributors to the U.S. becoming a net producer compared to any other energy source.

Previous comments from Vice President Harris have indicated a more negative bias toward fossil fuels, with her repeatedly showing support for a total “ban” on fracking. However, more recently, she, along with her campaign, seems to be walking back some of that hostility – perhaps in acknowledgment of the economic reality of the current U.S. energy industry. Clearly, not all this confusion over her policy toward fracking is unfounded. As recently as in 2019, when seeking the Democratic Party nomination for President, VP Harris stated she would “completely ban the practice of fracking” for oil and gas production. In more recent interviews, however, she says she no longer holds that position. As evidence of her commitment to U.S. energy independence, VP Harris cites that she cast the deciding vote in the U.S. Senate for the passage of the Inflation Reduction Act of 2022 (IRA), a law that contains several provisions supporting U.S. oil and natural gas production.

VP Harris’s platform also states that one of her goals is to reduce costs for all Americans. It also mentions how she and the current Biden administration worked to lower gasoline prices by releasing 200 million barrels of oil from the Strategic Petroleum Reserve (SPR) and an additional 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve (NSGR). As reported in a prior DAC Energy Monthly, this sale from the SPR reduced U.S. oil reserves to levels not seen since the 1980s, while the closing of the NGSR was a planned event. Established in 2012 in response to Super Storm Sandy, the NSGR was created to lower the risk of supply disruptions in the Northeastern United States. However, the reserve has faced several challenges since its establishment, including mounting operating costs and lower demand. This all led to its eventual closure.

Like former President Trump’s campaign platform, the Harris campaign also lays out several priorities that are tangentially related to oil and gas. This includes a call to strengthen energy supply chains and critical infrastructure, a commitment to the agricultural industry, and enacting policies that bring manufacturing back to America. However, unlike the Trump campaign’s current policy platform, the Harris campaign moderates these goals by including language about “climate justice,” “Big Oil,” and conservation – all traditional buzzwords for increasing regulations on the oil and gas industry.

While there are many similarities between the policy objectives of the two Presidential candidates, the actual mechanisms by which they would be achieved are quite different. Clearly, the devil is in the details. Although former President Trump’s campaign outlines explicitly his support for increased U.S. oil and natural gas production, the Harris campaign, along with the candidate herself, is at best not openly hostile toward the oil and gas industry. It is also worth mentioning that what politicians say on the campaign trail and at policy stump speeches is often quite different in practice, especially once they are in office. In summary, while words don’t always lead to definitive actions, in either case, we hope a rational approach to national energy policy remains a priority of either administration. America’s economic future depends on it.

Sources:

1. https://www.eia.gov/energyexplained/us-energy-facts/
2. https://www.eia.gov/dnav/ng/hist/n9050us2M.htm
3. https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus2&f=m
4. https://rncplatform.donaldjtrump.com/?_gl=11gnzw9d_gcl_au*NDYwMzMxNjA0LjE3MjU0NTg1NDQ.
5. https://www.presidency.ucsb.edu/documents/2024-democratic-party-platform

ENERGY MARKETS BY THE NUMBERS

U.S. Total Crude Oil Production and U.S. Crude Rotary Rig Count (as of October 18, 2024):

1. West Texas Intermediary (WTI) oil price was $68.69 per barrel (-2.0% m/m)
2. U.S. oil production was 13.5mm bbl/d (+2.3% m/m)
3. U.S. oil rig count was 482 (-1.23% m/m)

The U.S. Commercial Crude Oil Inventories (excluding those in the Strategic Petroleum Reserve) and Inventory Changes (As of October 18, 2024):

• Inventory increased by 13.0 million barrels month over month to 426.0 million barrels (5.8% below the 5-
  year average).
• Total crude stockpiles, including the Strategic Petroleum Reserve (“SPR”), increased by 15.7 million barrels month over month to 810.7 million barrels.

U.S. Imports and Exports (as of October 18, 2024):

1. U.S. crude oil 4-week average imports were 6.2 mm bbl/d, down 2.4% month over month.
2. U.S. crude oil 4-week average exports were 4.0 mm bbl/d, up 2.3% month over month.

U.S. Refinery Inputs and Utilization Rates (as of October 18, 2024):

1. U.S. crude oil refinery inputs averaged 16.1 mm bbl/d for the week October 18, 2024. Four-week inputs
   averaged 15.8 million bbl/d, 2.8% higher than the same time a year ago.
2. Refinery Utilization Rate was 89.5%, down from 90.9% for the previous month. This is higher than the same period last year, which was an 85.6% utilization rate.