Balance and challenges: what Biden’s victory could mean for US oil and gas

JP Casey 11 November 2020 (Last Updated November 11th, 2020 10:07)

Earlier this week Joe Biden was confirmed as the next president of the US, following days of tense vote-counting. We round up the oil and gas industry’s reaction to the news, ahead of what could be a challenging four years for the President-elect.

Balance and challenges: what Biden’s victory could mean for US oil and gas
Earlier this week Joe Biden was confirmed as the next president of the US, following days of tense vote-counting. Credit: Gage Skidmore

After the chaotic premiership of Donald Trump, the US has elected a new president, Joe Biden, with the former vice-president planning bold moves to unite what many consider to be a deeply divided country. Yet while much of Trump’s presidency was dogged with controversy, his election was greeted with optimism by some in the energy industries, with his desire to see domestic US production of a number of industrial materials, from coal and oil to rare earths.

Indeed, the energy industries are one of few sectors where Trump’s leadership could be considered to have had a positive effect, with the total volume of crude oil produced by the US increasing from 8.8 million barrels per day in 2016 to 12.2 million barrels per day in 2020. The industry itself has highlighted a number of developments over the last four years too, with the American Petroleum Institute (API) reporting that in 2017, the oil and gas sector offered an average salary 85% higher than the average private sector salary across the US, and that between 2013 and 2017, the industry paid an effective tax rate of 34%, higher than the rate for the S&P 500 companies, suggesting that the sector has made a meaningful contribution to the US economy more broadly.

In contrast, Biden’s proposed energy reforms have worried the oil and gas industry, which include, most notably, a $1.7tn investment in clean energy and green jobs to help the US reduce its reliance on oil and gas production. With the oil and gas industry adamant that its work is integral to the US’s energy security, Biden looks set to have a tough balancing act in the years to come.

Gulf Energy Information: “Energy poverty that will impoverish middle class and poor Americans”

Writing in World Oil on October 26th John Royall, president and CEO of Gulf Energy stresses that the  U.S. needs the oil and gas industry, as “it’s a very big part of what makes us prosperous as a nation.

“It’s what allows Americans freedom, to travel, to live where they want to live, to enjoy an abundance of not only energy, but reasonably priced food and consumer products. The Biden plan will lead to a kind of energy poverty that will impoverish especially middle class and poor Americans. Heating, cooling, transportation, manufactured goods, food—virtually everything will become much more expensive.

“Rather than to be continually criticised by Biden and others who use our products for their own lives and business, it would be a much more productive approach to recognize the importance of the products we produce in the oil and gas industry, and to work toward a cleaner usage of fossil fuels as part of a broader energy mix in the future.”

Global Data: “transitioning away from gas will be contrasted with its current benefits”

“With respect to natural gas, its production can eventually be impacted as an associated commodity in the production of oil,” explained Adrian Lara, senior oil and gas research manager at Global Data, on November 3rd. “At the same time, there is a dependency to natural gas in the US power and industrial sector.

“Transitioning away from gas in these sectors will likely be contrasted with its current benefits and the viable alternatives. For instance, during the last decade natural gas availability and price competitiveness has been fundamental in replacing coal fired plants and helping reduced carbon dioxide emissions. For the industrial sector, natural gas is still the main choice as a source of industrial heat in processes such as the ones to produce steel, iron or cement, and has few technological alternatives. In this sector reduction of carbon dioxide emissions will likely require capture and sequestration.

“A ban on new permits on federal land would negatively impact the US production forecast once the existing permits are exhausted. Under this scenario, there would be a larger negative effect on the production outlook than with only the banning on new federal land leases. Under this scenario, by year 2030 crude oil production levels would range in between 9.8 to 10.7 million barrels per day. Similarly, for natural gas by the year 2030 production would have levels between 90.5 and 94.7 billion cubic feet per day.

“Banning of new leases and new permits on federal lands has a more profound impact on federal offshore production, particularly in the US Gulf of Mexico. In this offshore region, production from federal leases accounts for approximately 70% of the total offshore production. Without new leases, awarded exploration activity can be significantly reduced in the mid to long term.

“A change in the US Government administration would not necessarily impact the oil and gas industry in the short term. However, after few years the measures to transitioning away from oil will be noticeable in the production levels of oil and natural gas and the US would be on track to be much less dependent on fossil fuels. All this with the challenge of achieving an effective replacement by renewables sources in key sectors, while at the same time keeping the country’s energy security.”

Greenpeace: “Biden’s job is to ensure that no one is left behind”

Janet Redman, climate campaign director at Greenpeace USA, said on November 4th that: “the transition from oil and gas to renewable energy is inevitable.

“Justice for workers and communities is not, especially if this transition is left to fossil fuel corporations. We need only look to the coal industry — where bankrupt companies dole out million-dollar bonuses to CEOs while slashing their workers’ pensions and health benefits — to see that fossil fuel executives do not have workers’ interests at heart.

“Joe Biden’s job is to ensure that no one is left behind. Biden should couple Green New Deal-style investments in renewable energy with job guarantees, retraining, and opportunities for family-sustaining, union jobs in the sustainable economy of the future.”

API: “We need policies that keep household energy costs low and protect skilled jobs”

Mike Sommers, president and CEO of the API, announced on November 7th that: “During this unprecedented year of public health and economic crises, we need policies that keep household energy costs low and protect and grow the more than 10 million skilled U.S. jobs supported by our industry.

“With smart policymaking and private-sector innovation, together we can build a better, cleaner future while expanding access to energy produced in the United States.

“Our country has made dramatic progress over the past decade, leading the world in both emissions reductions and in the safe and responsible development of American energy. America’s natural gas and oil companies haven’t waited for governments to act on climate—we have driven progress through technology, innovation, and constant reinvention, and we’ll support bipartisan policies that build on that progress. We stand ready to work with members of both parties to forge those bipartisan solutions.”