What is at stake? In theory, quite a lot. The US is the world’s largest oil consumer with a booming natural gas industry as well as being a large emitter of greenhouse gases.
Yet, two Washington-based consultants – Robert McNally, of The Rapidan Group, and David Goldwyn, of Goldwyn Global Strategies – have just released a detailed report on the presidential elections, concluding that the event may have less impact on US energy policy than many believe.
Although the authors are from the opposite sides of the political spectrum – Mr McNally is a Republican and Mr Goldwyn, a Democrat – they share a common background: both have worked at senior levels in the US government, including the White House and the State Department.
The report, “The 2012 US elections: implications for energy policy and oil and gas markets”, states that both candidates’ room for manoeuvre would be limited due to “unprecedented, massive and sustained budgetary and fiscal challenges”. For energy policy, this means that whoever is in the White House, “there will be little room for new tax incentives, spending policies, or mandates”.
Moreover, “in any post-election scenario, resource nationalism and protectionist impulses are going to strengthen in both parties”, putting pressure to bottle up hydrocarbon resources in the US to keep prices lower and improve national energy security.
The fiscal handicap does not mean, however, that nothing will change, say Messrs McNally and Goldwyn. The two presidential candidates have opposing views on greenhouse gas regulation, hydraulic fracturing – commonly known as fracking – and access to federal land and offshore water for oil and natural gas drilling. Of those, the most important for the energy market is likely to be Mitt Romney’s opposition to federal regulation of fracking.
But other key policies are unlikely to be impacted by the outcome of the presidential race. Both candidates have similar views about the renewable fuel standards legislation that supports corn-made ethanol; both are in favour of LNG exports, although with limits. The consultants also say that both are likely to support the Keystone XL pipeline bringing crude oil from Canada, even though the project is expected to be delayed or even end in failure no matter who is elected.
The authors say there are two big unknowns: whether or not a second Obama administration would adhere to its relatively pro-oil and gas development stance, and whether a Romney administration can govern along the lines of its campaign policy plans and rhetoric.
Either way, the race for the White House could have less of an impact on US, and thus, global, crude oil and natural gas markets than the political ads suggest.
The Commodities Note is a daily online commentary on the industry from the Financial Times