BMI Examines Trump and Harris Effects on USA Oil and Gas
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
In a report sent to Rigzone by the Fitch Group recently, BMI, a unit of Fitch Solutions, explored the impacts of policies presented by former president Donald Trump and current vice-president Kamala Harris for the U.S. oil and gas market.
BMI highlighted in the report that its Country Risk Team has not yet made a call in the elections. It revealed that, for the purpose of the report, it analyzed the two scenarios to which its Country Risk team assigns the highest probabilities.
One of these is “a Trump victory with a red sweep in the 2024 congressional elections” and the other is “a Harris victory, with a divided congress after the 2024 election”, the report outlined.
“A Trump presidency would improve sentiment in the U.S. domestic oil and gas sector, raising upside risks to our long-term oil and gas production forecast and our near-to-medium term U.S. hydrocarbons consumption forecast,” BMI analysts stated in the report.
“A Donald Trump presidency would mean a shift back towards facilitating production from the abundant oil and gas reserves in the U.S., while deprioritizing energy transition efforts,” they added.
“Under the ‘red sweep’ scenario … Trump would face limited headwinds in pursuing his policy agenda, having broad support in both chambers of Congress,” they continued.
The BMI analysts noted in the report, however, that they expect to see some constraints on Trump’s reform agenda, “in particular his plans to deepen tax cuts amid a ballooning fiscal deficit”.
The analysts also highlighted in the report that they “expect a rollback of tighten[ing] regulations targeting the industry, including the methane leak penalties and greenhouse gas emissions reporting standards, introduced by President Biden”.
“We would also expect to see a repeal of the updated environmental review process for energy infrastructure, which would facilitate investments in pipelines, export terminals etc. As President Trump would sustain the existing tax breaks for upstream oil and gas producers, we would expect him to likely repeal the EV tax credit that would likely slow EV adoption over the near term,” they added.
“Trump’s overall more business-friendly stance, with announcements about lowering corporate taxes, would improve broad investor sentiment in the U.S.,” they said.
In the report, the BMI analysts stated that they anticipate a boost in oil and gas investor sentiment under a Trump presidency, “which constitutes an upside risk to the long-term upstream production forecast”.
“However, we recognize only limited upside for our oil and gas production forecast over the near term, stemming from other constraints,” they said.
“We highlight the current, overarching strategy of U.S. independents to increase shareholder return over production growth,” they continued.
The analysts said in the report that this strategy is unlikely to change after years of weak returns over the last decade.
“On top of that, U.S. shale assets continue to mature, yielding lower output growth,” the analysts noted.
“Top upstream producers appear to be doubling down on technology advancements to offset the impacts of natural declines in production from their maturing fields. However, capex spending remains muted, lingering below 2018-2019 levels, with only small upside risks stemming from a Trump victory,” they added.
The analysts outlined that, under BMI’s Trump victory scenario, they “maintain a muted medium-term oil price forecast, with Brent averaging at $78.0 per barrel in 2025 followed by $77.0 per barrel over 2026-2028”.
Harris
In the report, the BMI analysts said a Harris presidency would result in broad policy continuity for the U.S. oil and gas segment but warned that they recognize downside risks to oil and gas demand stemming from the potential acceleration of energy transition efforts.
“In the Harris-win scenario, we assume a divided Congress would add headwinds to passing some of Harris’ most progressive proposals,” the analysts stated.
“Although we broadly expect a continuation of current policies, we note downside risks to oil and gas operators stemming from potential attempts to reduce oil and gas tax breaks. These risks are rather limited, as the Biden-Harris Administration has not delivered major results on this front while in office, despite the promises made during Biden’s 2020 campaign,” they added.
“That said, we could see some acceleration in energy transition efforts, with chances of a doubling down on EV adoption and support for non-hydropower renewables beyond the Biden-Harris proposals. We note, however, that Harris’ stance against oil and gas and in favor of low-carbon energy has weakened during her campaign as she tries to appeal to voters in the swing states,” they continued.
The analysts highlighted in the report that many of the swing-state economies “continue to rely on upstream activities including shale plays”.
“Harris has now also stated she will not ban fracking – a reversal of the stance taken in her 2020 presidential campaign,” the BMI analysts pointed out in the report.
“As we see Harris becoming more moderate in her oil and gas and climate-related proposals, and because we expect legislative headwinds, we see only limited risk of an introduction of much tighter regulations on oil and gas companies which would raise downside risks to our upstream production forecasts,” they added.
The analysts went on to state, however, that they do expect to see somewhat weakened sentiment amongst U.S. independents.
The BMI analysts noted in the report that, during the Biden presidency, the U.S. reached record oil and gas production levels but pointed out that this was “primarily driven by supportive external factors like elevated oil and gas prices, rather than any supportive policies from the White House”.
“In terms of broader business sentiment, should we see Harris successfully pursing an increase in corporate tax rates to 28 percent, this would weaken business sentiment in the U.S. impacting corporates across the board,” the analysts said in the report.
TV Debate
BMI’s report was conducted prior to the Trump-Harris television debate, which took place on Tuesday.
In a market analysis sent to Rigzone on Wednesday, Michael Brown, Senior Research Strategist at Pepperstone, said the debate had “stolen plenty of headlines”.
“Post-debate polls point to VP Harris having won the contest comfortably, though it feels far too early for markets to worry about the electoral noise and political hullabaloo just yet, and far-fetched to imagine that the last night’s televised pantomime will sway the decisions of too many undecided voters in the key swing states,” Brown added.
In a statement posted on the Quinnipiac University Poll website on September 9, Quinnipiac University Polling Analyst Tim Malloy said, “with 32 electoral votes to offer between them, North Carolina and Georgia loom large among the potential pathways to the presidency and neither state offers a clear-cut favorite”.
Rigzone has contacted Trump and Harris for comment on the BMI report, Brown’s analysis, and Malloy’s statement. At the time of writing, neither presidential candidate has responded to Rigzone’s request yet.
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas