Jul. 03 2019 — President Donald Trump’s administration has worked tirelessly to rebrand domestic energy policy in the two and a half years since he came to office.
As this White House markets it, US energy is “dominant”. Fossil fuels are not produced or exported, they’re “unleashed”. And, of course, US LNG exports have been called “molecules of US freedom”.
“The golden era of American energy is now underway,” Trump has said.
By the numbers, Trump’s time in office has been a momentous success for oil producers: since his inauguration, US crude output has surged from 9.14 million b/d to a forecasted record 12.34 million b/d in July, a 35% increase, according to the US Energy Information Administration.
By the end of next year, EIA forecasts US oil output to average 13.5 million b/d, accounting for more than 13% of total global oil supply and nearly all growth.
“American energy production is soaring to new heights thanks to President Trump’s policies,” the White House said in an official statement in May.
But how much credit can Trump claim, really, for record US oil production? Is output shattering monthly records because of Trump administration policies, or because of market fundamentals that would have boosted US oil supply no matter who occupied the White House?
Three years ago, I attempted to quantify the supply impact of the 2016 presidential election. Just how much difference would a President Clinton or President Trump make in terms of barrels per day?
Analysts I spoke with cautioned that the entire premise of the exercise was flawed. There are too many unknowns; oil prices often have little to do with who is US president; geopolitics are inherently unpredictable; and so on.
We eventually settled on a 1 million b/d net difference: If Hillary Clinton were elected, her arguably less fossil fuel-friendly policies could curb about 500,000 b/d of domestic output, while Trump’s more industry-friendly policies could cause an increase of 500,000 b/d. All things being equal, which, of course, they were not.
That possibly over-simplistic forecast was ultimately proven correct. Or wildly incorrect. It’s an unknown and will remain so.
In reality, US crude production has jumped by 3.2 million b/d since Trump became president. So, how much did he have to do with that?
Steady oil prices
Trump’s presidency may have benefited from good timing with respect to the oil market cycle. In the months leading up to the 2016 presidential election, US output had fallen to about 8.5 million b/d, down about 1.1 million b/d from April 2015 after Brent spot prices cratered at just above $26/b.
Trump’s first two and a half years in office also took place amid comparatively stable oil prices, with Brent prices remaining between about $44/b and $86/b, a $42/b range. During Obama’s first two and a half years, prices fell nearly to $39/b and climbed to almost $127/b, an $88/b range. US oil output was also relatively flat during that time, and remained globally insignificant, increasing from about 5.14 million b/d in January 2009 to 5.43 million b/d in July 2012.
In addition, the policy the industry lobbied the most for, and which is often pointed to as a clear factor behind record production, was the end of US restrictions on crude oil exports, which Obama signed into law in December 2015. The US set a monthly record in February when it shipped out 2.99 million b/d of crude, according to EIA. Weekly data shows that US exports have since crossed the 3 million b/d mark, climbing as high as 3.7 million b/d in mid-June.
Industry lobbyists say other Trump administration policies, such as repeals of Obama-era environmental and safety regulations, have not had any significant impact on supply. Some of these repeals have been tied up in litigation and are likely to remain so for years.
Trump’s approval of the Dakota Access oil pipeline may have been a factor in helping North Dakota break production records, climbing above 1.4 million b/d in December, but that is a somewhat modest jump of about 173,250 b/d from the highs reached when Obama was in office. In addition, Trump’s approval of Keystone XL remains in litigation and a federal court decision caused his Interior Department to indefinitely shelve plans to drill in nearly all federal waters, from the Atlantic Coast to the Arctic. The administration’s plans to offer oil and gas leases in the Arctic National Wildlife Refuge also face a likely legal challenge.
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Part of the reason neither Trump, nor any US president, can claim much credit for oil output, at least in recent history, is that so much of production takes place on private and state lands. The number of federal oil and gas leases in effect has fallen steadily over the past decade: from about 53,400 leases in fiscal 2009 to about 38,150 in fiscal 2018, according to the US Bureau of Land Management. The number of producing leases, however, has grown slightly: from about 22,600 producing leases in fiscal 2009 to over 24,000 in fiscal 2018, according to BLM.
Foreign policy and oil supply
While the Trump administration typically touts a deregulatory agenda as bolstering US energy production, analysts see Trump’s foreign policy as having the most direct impact, mainly through sanctions that have caused a loss of barrels on the world market, a gap US producers are eager to fill.
Venezuela, which was producing 2 million b/d when Trump took office, produced about 730,000 b/d in May, according to EIA. While US sanctions have certainly contributed to that decline, the Trump administration has repeatedly tried to distance the role that sanctions have played in the collapse.
As tensions have flared, Iran output has fallen from 3.8 million b/d to about 2.3 million b/d over the same time period, and analysts believe Iran’s oil exports may have fallen as low as 800,000 in May, from about 1.7 million b/d in March. The US reimposed sanctions on Iranian oil exports in November and allowed waivers to some of Iran’s biggest crude and condensate buyers to expire in May.
US producers have also benefited from the agreement between OPEC and other producers to cut about 1.2 million b/d. Trump is unlikely to be able to take credit for that after pressing the Saudi to boost output, in order to prevent his sanctions actions from causing a spike in gasoline prices.
So, is the “golden era” of American energy underway, as Trump claims? Maybe, but it may remain unclear how much he had to do with it.