FOCUS: Trump's trade and energy policies create uncertainty in oil markets
| DOI | http://doi.org/10.1111/oet.12486 |
| Published date | 01 July 2017 |
| Date | 01 July 2017 |
FOCUS
Trump’s trade and energy policies create uncertainty in oil markets
e administration of US President, Donald Trump,
has laid down a number of markers for the future of
the country’s oil industr y. e broad intention of the
measures now being proposed by President Trump is to
remove many of the barriers that the administration sees
as holding back t he growth of oil production in the US .
e measures include the removal of several restric-
tions on the production of oil on lands belonging to the
federal government, together with proposals to increase
exploration on part s of the US continental shelf. In addi-
tion,PresidentTrumpwantstospeed-uptheprocessof
awarding permits, not only for exploration and produc-
tion activities, but also forthe building of pipelines. One
earlymovebythenewadministrationwastoallowthe
opening of the Dakota Access Pipeline (DAPL) which
hadbeenheldupbytheObamaadministrationfollow-
ing a series of protests against the route of the line.
Two other proposals by the White House have imp or-
tant implications for the oil industry both in the US
and elsewhere. One of them is President Trump’s stated
desire to renegotiate the North Americ an Free Trade
Agreement (NAFTA), which would aect energy rela-
tions, including oil, with Canada and Mexico. e other
ishissupportoftheideaofwhatistermeda“border
adjustment tax,” which is in eect a tax on US imports,
including oil.
Detailsofsomeofthemeasuresremainsketchy.eir
implications for the US and beyond, however, are clear.
Anything that boosts the already rapid growth of US oil
productionisboundtoleadtoanincreaseinexportsof
oil by the US, which are already themselves increasing
rapidly. is, in turn, would add to the present surplus
of oil, especially the light, sweet grades, thereby ke eping
global pric es under downward pressure [1]. A US import
tax on oil would have a similar eect since the fob prices
of crude would have to fa ll in order for them to compete
in the US against domestically produced crude.
Increasing production
e Trump administration is actually pursuing a
long-standing US policy that dates back to the 1970s and
is aimed at the achievement of energy self-suciency
by the US, with particular emphasis on the reduction
of imports from the Persian Gulf. e pursuance of
the policy has been carried out with varying levels of
commitment by dierent administrations since the First
Oil Shock of 1973 - 1974. President Trump has simply
moved the issue back up the government’s agenda.
ereasonhehasbeenabletodothisistheexplosive
growth in US oil production, especially from shale and
other tight formations, in recent years [2]. e rise has
Table A
US Oil Production, 2011-2018
Year Production∗
(mn bpd)
2011 7.86
2012 8.89
2013 10.07
2014 11.78
2015 12.76
2016 12.35
2017 12.95†
2018 13.75†
∗Including NGL
†Forecast
Totals rounded
Source: (2011-2016) BP Statistical Review of World Energy,2017
(2017) Rafes Petroleum forecast
been particularly sharp since 2011 and looks set to grow
strongly this year and next (see Table A).
e Trump administration appears to believe that
highergrowthcanbeachievedinfutureifthegrant-
ing of permits to explore for oi l can be sped up and the
areas available for exploration and production can be
increased. Many of the presentrestrictions have an envi-
ronmental basis and th ere is likely to be strong resistance
to their modi cation or removal. ere is als o opposition
tooildevelopmentsbygroupssuchasnativeAmericans
whose lands are aected.
Environmentalists are particularly exercised over the
idea of more drilling in coastal waters and in remote and
wilderness areas, such as the Arctic National Wildlife
Refuge (ANWR) in Alaska. e White House claims
that previous administrations have prevented the “re-
sponsible development” of US resources by excluding
94% of the US Outer Continental Shelf’s 1.7 bn acres
from exploration and development [3]. e Outer
Continental Shelf is estimated to contain 90bn bbl of
undiscovered technically recoverable oil. e Secre-
tary of the Interior has been ordered to review the
rules governing a number of these areas with a view to
speeding-up developments there [3].
Along with these proposals go fur ther ones to tax
oil imports and to renegotiate the terms of trade with
CanadaandMexicoasgovernedbyNAFTA,whichPres-
ident Trumphas describ ed as a “disgrace” and a “disaster
for our country,” and has called for the trade in energy
to be discussed “very, very quickly” [4].
All the above proposed measures are p art of what
President Trump as candidate called an “America-First”
energy plan [5]. As yet, they do not form part of a
© 2017 John Wiley& Sons Ltd
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