The results of last week’s election have turned the future scenarios for energy policy upside down.
As OPEC's semiannual meeting in Vienna on Nov. 30 approaches, uncertainty remains over its previously pledged plan to cap production in an attempt to boost global oil prices. Crude oil futures prices have been sinking recently as traders believe that reaching such an agreement is proving to be more difficult than initially anticipated. Moreover, it is generally expected that any agreement will be very leaky, limiting its impact on future oil prices. In other words, it will require further recovery of oil demand and constrained supply growth to solve the inventory overhang that is pushing prices lower.
While global markets watch the OPEC struggles, here in the U.S. the political fallout from the defeat of Hillary Clinton has environmental activists racing to find plans to disrupt any loosening of the constraints on the oil and gas industry by the incoming Trump administration.
Billionaire hedge fund/environmental activist Tom Steyer has called for President Barack Obama to “withdraw from disposition” any section of the outer continental shelf that hasn’t already been leased for oil or gas drilling. This would be similar to previous dispositions that removed Alaska’s Bristol Bay and a large swath of the Eastern Gulf of Mexico off the Florida coast from possible exploration. To the oil and gas industry, such an action would represent a serious blow, as these areas could represent significant future business opportunities.
Steyer’s plan has received a positive response from environmentalists, but some political observers warn that supporters should be careful what they wish for. Observers believe such sweeping action could motivate the new administration to seek to overturn the 1953 Outer Continental Shelf Lands Act. Overturning that legislation could open up the entire U.S. coastline to exploration and development — unless a new law restricted certain areas — thereby worsening the impact from an environmental perspective.
The next 60 days will be important to watch, particularly for those in the U.S. oil and gas industry, especially the offshore sector. As we saw on Nov. 8, trying to predict the outcomes may be a fools’ errand.