How Will Biden’s Presidency Impact South America’s Oil Boom?

Much has been made of President-elect Joe Biden’s energy policies and the negative impact they will have on the U.S. oil industry, which is laboring to survive a global oil supply glut and sharply weaker energy prices. This is in stark contrast to outgoing President Trump’s pro-industry policies, which it is claimed helped the U.S. shale industry survive the worst oil price slump since the early 1990s. Energy sector analysts and insiders expect Biden’s commitment to ban new oil and natural gas leases on public lands, aggressively reduce emissions, rejoin the Paris Climate Accord and reinstate the Iran nuclear deal to harm the U.S. petroleum industry. It is feared, if those policies are successfully implemented, they will cause oil prices to soften and place greater pressure on U.S. shale oil drillers. Arguably, Trump’s hard-nosed foreign policy, petro-diplomacy, and constant intervention in global energy markets added an unhealthy degree of volatility to oil prices, even suppressing them, doing more damage to the domestic energy industry than heightened regulation. During 2018, when Brent soared to the highest prices seen since 2015 and flirted with $80 per barrel, Trump applied substantial pressure to OPEC to push oil prices lower by opening the spigots and increasing production. While Saudi Arabia and its allies, including Russia, sought to stabilize the price at around $75 per barrel, Trump insisted they boost output by 2 million barrels. The rationale for Trump’s constant meddling to manipulate oil prices is simple; significantly lower prices are a form of economic stimulus at no cost to the U.S. federal government. Nor does it create the inflationary risks linked to money creation which is the stimulus policy of choice for the U.S. Federal Reserve. Biden’s policies, while increasing the regulatory burden and hence operating costs for upstream U.S. oil producers, could cap petroleum output from the world’s largest oil and natural gas producer. That would provide some relief for a world awash in oil and mired in a six-year-long supply glut that is responsible for the prolonged price slump. Regardless of the hype surrounding an anticipated rapid uptake of electric vehicles and the emergence of peak oil demand, fossil fuels will remain a crucial part of the global energy mix for some time. While the existing global supply glut will weigh on prices for the foreseeable future, demand for fossil fuels will remain firm for at least a decade.

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