What US Election Outcome Means to Energy Outlook: S&P Global Platts Analytics Perspective

Side-by-Side Comparison of Commodities Impact under Either a Biden or Trump Win

NEW YORK (November 3, 2020) – The impact of the US elections on commodities remains uncertain, in that a re-election of President Donald Trump would likely mean a continuation of easing regulatory constraints on the energy industry, while a Joe Biden election victory would most likely increase regulation and encourage growth in renewables, according to the Platts Analytics US Election analysis released by S&P Global Platts ("Platts"), the leading independent provider of information and benchmark prices for the commodities and energy markets.

However, in the short term it will be the likelihood of stronger economic growth and a more positive outlook on global trade under a Biden administration that could lend support to energy prices. But under such a scenario, offsets could include the potential return to the negotiating table on the Iranian nuclear deal and growing humanitarian issues in Venezuela, with any early return of oil supply from either country weighing heavily on energy prices.

An Election win by either candidate points to large rollback of agriculture sector subsidies.

Political polls overwhelmingly tilt towards a Biden victory, along with Republicans losing their majority in the US Senate. In the US House of Representatives, the Democrats are expected to extend their majority by perhaps six seats. Despite the overwhelming poll data, S&P Global Platts Analytics still believes there remains a large degree of uncertainty regarding the outcomes. Below find a brief look at some of the implications of the outcome of the US Elections:

If a Trump Re-Election:

• Under Trump we can expect a continuation of Trump's trademark style of one-off transactional diplomacy, treating allies and adversaries no differently while Biden would look to heal relationships and strengthen trade partnerships. Significant progress has been made in the Phase 1 China-US trade deal despite the 2020 commitments not being met (with agricultural goods ramping up) in part amidst weaker prices. The shortfalls in purchases are expected to be rolled over into the 2021 commitments supporting energy and agricultural commodities.

• Under Trump energy policy is likely to remain supportive of the energy industry, encouraging US exports and loosening regulatory constraints, while Biden will pursue Obama-era policies, with tighter regulation on pipeline, flaring and fracking especially on federal lands.

If a Biden Victory:

• Under Biden we expect faster economic growth, higher employment, acceleration of inflation, a weaker dollar, and smaller deficit supported by the assumption of a greater degree of stimulus to support growth, less restrictive assumptions on immigration, stronger healthcare programs, and support for a higher minimum wage.

• Tax policies and perceived subsidies to the energy industry could come under renewed scrutiny under Biden. Provisions such as the master limited partnership structure, depletion allowance, intangible drilling costs, and section 199 domestic manufacturing deduction could be reduced. Such actions, along with still weak energy prices for both oil, gas, and coal, would further hinder the recovery path for the energy industry.

• Under Biden the renewables industry will see a more favorable environment and a return to the Paris Accord commitments, which will accelerate investment in solar wind and storage, impacting fossil fuel demand in thermal power generation.

SEE SIDE-BY-SIDE OUTLOOK COMPARISONS

S&P Global Platts Media Contact update

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