"US Oil Production Regulation Is Market-Driven, Not Presidential"
Although former President Donald Trump was elected as the President of the United States and a large-scale rollback of environmental regulations is expected, major foreign media reported on the 10th (local time) that the possibility of a significant increase in oil production over the next four years is low.
Trump, who made energy policy one of his key pledges, promised to eliminate unnecessary regulations to increase oil production and lower consumer prices. In his victory speech after the election, he said, "The United States has more 'liquid gold' than any other country in the world. More than Saudi Arabia." During the presidential race, he emphasized expanding oil and gas drilling by chanting "drill, baby, drill."
As a result, expectations are rising in the oil industry. Harold Hamm, founder of Continental Resources, said, "I am extremely pleased with Trump’s victory," calling it "a monumental win for the future of American energy and national security."
Mike Sommers, president of the American Petroleum Institute, said that although there had been regulatory offensives over the past four years, he now expects a reversal. He stated, "The administration’s signal that it wants a strong oil and gas industry in the U.S. will be a critical factor in attracting the investments needed for this industry to continue growing."
The industry anticipates the repeal of exhaust gas regulations, expanded access to hydrocarbons, and weakening of endangered species protections. Trump also pledged to repeal the Inflation Reduction Act (IRA), a key climate bill of the Biden administration.
During his first term, former President Trump actively intervened in oil prices. In 2018, he pressured OPEC to increase production to lower gas station prices, and in 2020, as oil prices plummeted due to the COVID-19 pandemic, he urged production cuts to prevent bankruptcies in the U.S. shale industry.
However, despite the prospect of large-scale deregulation, the market sees little chance of rapid oil production growth during Trump’s term. Despite Biden administration regulations, oil production has increased rapidly, setting a record of 13.4 million barrels per day last August. Additionally, investors, who have been hurt by rising debt in the oil industry in recent years, prefer companies to prioritize profits over growth. Therefore, the capital discipline model imposed by investors is expected to remain unchanged.
Jim Burkhard, head of oil market research at S&P Global, said, "It is not the president but prices and Wall Street that regulate U.S. production." S&P forecasts oil production to average about 13.2 million barrels per day this year and 13.6 million barrels per day by 2025, then decline due to falling prices. They believe Trump’s reelection would not affect the short-term outlook.
However, some opinions suggest that a few months of price declines due to weak demand in China and OPEC+’s plan to increase supply could fulfill the pledge to lower energy prices. On the other hand, measures to increase pressure on Iran, such as sanctions on Iranian oil exports, could push international oil prices higher.
Bob McNally, head of Rapidan Energy and former energy advisor to the George W. Bush administration, said, "The president has very limited means to influence crude oil prices in the short term, but if strong global supply growth outpaces demand over the next few years, Trump might be lucky enough to witness a sharp drop in oil prices." He added, "However, we will learn the lessons of 2020 again. Low oil prices may please consumers but harm the U.S. shale industry."
Despite Trump’s plans to roll back environmental regulations, the market expects major oil companies to continue their efforts to reduce carbon emissions. Paul Bledsoe, a former climate advisor to the Bill Clinton administration, said, "Trump’s election does not erase expectations that energy companies will reduce emissions and invest in clean energy. This is both public and investor expectation."
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