Washington — The table is set, it's time for the main course.
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The winner of the race to the White House between incumbent President Donald Trump and challenger Joe Biden, along with a potential shift in the balance of power in the US Senate, clearly are the highest-profile contests on the docket in the ongoing election. Results there hold enormous implications for energy commodities and markets ranging from global trade flows for oil and LNG, to climate change, to the very nature of energy regulation.
But there's so much more to keep an eye on.
ADDITIONAL COVERAGE: 2020 US Elections
Over the past eight weeks, Platts has produced a comprehensive series of commodity-focused feature packages to help define the major impacts and subtle twists at play along the full range of energy issues.
Biden has called for a swift pivot to clean energy while Trump makes the case for the country's abundant fossil fuel resources and an "energy dominance" agenda. The winner will control regulations that could stymie or accelerate growth across energy sectors and markets and help to direct investment.
The US appears headed for a clean energy future regardless of who sits in the White House. But the pace of the energy transition – and presumably the severity of ensuing climate change impacts – could look dramatically different depending on the victor of the Nov. 3 presidential election.
For oil, natural gas, petrochemicals and metals, trade policy also looms large in the election stakes, after Trump's aggressive trade policies reshaped commodity flows.
While analysts see Biden preserving a role for gas, his climate plan would invest $2 trillion in renewable power, electric grid upgrades, green building initiatives and other clean energy initiatives that would displace fossil fuels.
Things have changed
The winner will face an environment that has changed much since the 2016 election.
Biden could end the tit-for-tat tariffs between Washington and Beijing that have restrained US LNG exports to China and made commercial development more challenging. Alternatively, President Donald Trump could make it easier to drill for the shale gas that feeds terminals and further speed up project permitting.
The LNG industry is also awaiting the winner of the Trump/Biden contest. The industry faces a critical year in 2021, during which new capacity may be sanctioned or fall off the board altogether.
Crucial to the ability of either candidate to promote meaningful energy policy, regulation and market oversight is the balance of power in the US Senate. Republicans hold a three-seat advantage in the senior chamber, but the GOP is defending more seats in this election cycle and many of those are under pressure from Democrats. Flipping the Senate and unifying Congress under Democratic control, seen as a real possibility by pollsters, would present a new President Biden with a very strong playing field for at least the next two years.
Races for the Oval Office and Senate majority leader's gavel are not the only contests of interest for energy market players. Several down-ballot races and questions are drawing close attention.
Here's a quick rundown of some of the most consequential:
- In a Nevada ballot initiative, voters will decide whether to give a second and final approval to amending the state's constitution to include a 50%-by-2030 renewable portfolio standard. NV Energy, whose utility subsidiaries serve about 1.2 million electric customers in Nevada, is already pursuing large-scale transmission and solar-plus-storage projects to meet the state's green energy goals. Governor Steve Sisolak signed the requirement into law in 2019, but Nevadans are being asked whether to approve Question 6 and amend the state constitution to include the standard, which would prevent a future legislature from changing the requirement without the say-so of voters.
- New Mexico voters will decide whether to change how the state public regulation commission is set. Constitutional Amendment 1 would reduce the number of commissioners from five to three and bring an end to elections determining the makeup of the regulatory body. Under the measure, starting Jan. 1, 2023, the New Mexico governor would appoint three commissioners chosen from a list of nominees put together by a committee. Approval of the measure would make future gubernatorial elections more significant for utility oversight, as governors would gain greater control over the regulatory body.
- In Washington, incumbent Governor Jay Inslee holds a sizable lead in the polls against Republican Loren Culp, the current police chief for the city of Republic. Dubbed "the greenest governor in the country" when elected eight years ago, Inslee in 2019 signed legislation placing Washington on the path to have a carbon-neutral electrical grid by 2030 and 100% renewable energy by 2045. Culp has said little regarding energy policy for the state, but he generally favors less government regulation and supports free market solutions.
- The Arizona Corporation Commission has three seats out of five up for election, with the field of candidates split between three Republicans and three Democrats. The outcome could affect utility Arizona Public Service's pathway to achieving its recently declared 100% clean energy goal and determining what resources are included. Multiple candidates from both parties are pushing clean energy targets, while Republican Lea Marquez Peterson and Democrat Shea Stanfield told Ballotpedia they are in favor of 100% clean power policies. Arizona ranks third in the US in solar power capacity but generates most of its electricity from nuclear, natural gas and coal.
- In Minnesota, the Senate may flip to Democratic control in a tight race where all 67 seats are up for grabs, analysts suggest; Republicans currently control the chamber 35 to 32. The state may have a chance to join states with 100% clean energy goals if the Senate flips. Governor Tim Walz strongly supported the measure in 2019, a year in which Minnesota produced about 31% of its wholesale electricity from coal. Minnesota is also among the nation's top-five ethanol producers, and about 30% of all US crude oil imports flow through the state.
- The Michigan House of Representatives could flip to Democratic control with all 110 seats up for election, analysts suggest. Democratic control of the House would potentially shore up progress Governor Gretchen Whitmer has sought to make through the executive branch toward her goal of 100% clean energy. Michigan remains heavily coal-dependent for power generation, with coal supplying about 32% of the state's electricity in 2019. A Democrat-controlled House could support additional renewable energy-friendly policies, as renewable capacity has grown to supply 8% of Michigan's power in 2019.
Platts 2020 election coverage highlights
Much of the national discussion focuses on the presidential race, but voters also face a host of other key ballot choices. A potential shift to Democratic control of the US Senate would dramatically change the landscape for all manner of energy legislation, regulation and policy. At the state level, high-impact ballot measures, along with races for governor, state legislatures and key state commissions, are being closely watched in energy circles
The election coincides with an inflection point in public sentiment on natural gas, and the outcome could have substantial impacts on gas consumption, infrastructure permitting and production. Trump has pledged to continue his pro-fossil fuel, anti-regulation "Energy Dominance" agenda. While Biden sees a role for gas, his climate plan would invest $2 trillion in renewable power, electric grid upgrades, green building initiatives and other clean energy initiatives that would displace fossil fuels.
Under President Andres Manuel Lopez Obrador, Mexico is looking to reestablish its former energy monopolies and use them as an engine for economic growth. But a potential Biden victory in the US is seen by some as a catalyst that could force Mexico to change course and revisit a greener energy strategy. If Trump holds onto the White House, however, Mexico could continue to pursue its strategy of fossil fuel independence.
The US appears headed for a clean energy future regardless of who sits in the White House. But the pace of the energy transition - and presumably the severity of ensuing climate change impacts - could look dramatically different depending on the victor. Platts Analytics' expectations for the next few years include a brief rebound in coal and pullback in natural gas, while renewable generation continues to march upwards.
How much will November's presidential election actually influence the outlook for US oil and gas production? In this episode of Capitol Crude, Artem Abramov of Rystad Energy takes the contrarian view that whoever is in the White House next year will not greatly sway US production either way. Rystad predicts a federal drilling ban, as proposed by Biden, would have hardly any impact on oil and gas production in the medium term.
Stakes are high across the US energy and commodities sectors as Trump and Biden volley to shape energy, climate and trade policy for the next four years. Biden has called for a swift pivot to clean energy while Trump makes the case for the country's abundant fossil fuel resources. The winner will control regulations that could stymie or accelerate growth across energy sectors and markets and help to direct investment.
Sweeping climate legislation is not guaranteed to get top billing in 2021, even if Democrats are able to take both the US Senate and the White House. Coronavirus recovery packages could feature green incentives, experts said, but legislation that focuses on the pandemic and the economy will be front and center in the year ahead. Democrats have outlined aggressive climate and clean energy proposals and highlighted climate change mitigation as a focus for the party.
Biden could end tit-for-tat tariffs that have restrained US LNG exports to China and made new commercial development more challenging. Alternatively, Trump could make it easier to drill for the shale gas that feeds terminals and further speed project permitting. Whichever candidate gains the Oval Office, the impact on the LNG industry will be felt heading into 2021, a pivotal year in which new capacity may be sanctioned or fall off the board altogether.
The election presents a stark contrast for US oil policy that could shape supply/demand dynamics domestically and abroad, with implications for shale, sanctions, trade and OPEC relations. The greatest domestic impact could come from Biden's promise to stop issuing drilling permits for federal lands and waters, which could shrink US oil production by up to 2 million b/d by 2025. The top international risks center on the next administration's approach to Iran and Venezuela.
For the global oil market, one of the biggest wildcards is Iran sanctions relief under a Biden administration. This would return more than 2 million b/d to an already oversupplied market. This episode of Capitol Crude features two predictions -- Nareeka Ahir of Platts Analytics argues that Biden would seek a quick interim deal with Tehran, while Henry Rome of the Eurasia Group predicts an agreement could bring no more than 700,000 b/d next year.