Drill or Chill? Biden's Withdrawal May Make Election Energy Choices Clearer

---

Editor's note: This article has been amended to include the correct title of Mike Dolan.

Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--While Republican presidential nominee Donald Trump was chanting "Drill, baby, drill" to an enthusiastic convention audience last Thursday night, the subsequent Sunday announcement of Joe Biden's withdrawal from the Democratic ticket has made the latter party's choice less clear--and more concerning--for at least some energy industry observers.

Biden has endorsed Vice President Kamala Harris to succeed him on the ticket. However, having the presumable nominee withdraw just weeks before the convention has tossed the decision into uncharted waters, legally and otherwise, so whether delegates to the Democratic convention follow Biden's endorsement remains to be seen. Whatever happens, the energy industry will watch closely.

Just last Tuesday, after the July 13 assassination attempt on Trump, Reuters had reported that the markets were "putting Trump's chances of a return to the White House at more than 70%" over his then-thought opponent, Biden. Now all bets are off until the Democratic Party convention.

What are the Odds?
Now the news cycle has been jolted again, at least somewhat changing the odds, said Reuters Editor-at-Large for Finance & Markets Mike Dolan. "Now (Biden's) exit puts Harris firmly in the frame, the picture is becoming more balanced. Even though Trump remains (the) clear favorite, his 70%-plus probability this time last week following the failed attempt on his life has been pared back to 60%--even if much of that had happened by Friday."

Among Democrats or Democrat-leaning voters in a YouGov poll conducted after Biden's announcement, 60% felt Harris should be the nominee, about 21% preferred someone else, and 19% were uncertain. Among independents, the poll showed that Harris had only 30% support, with 36% preferring someone else.

What She's Done
Reuters recalled Harris's California record, saying, "During her time as California attorney general, Kamala Harris sued fossil fuel firms, prosecuted a pipeline company over an oil leak and investigated Exxon Mobil Corporation for misleading the public about climate change." Also, "...her opposition to offshore drilling and fracking suggests she'd be a fierce oil industry antagonist if she secures the Democratic nomination and wins the White House in November."

The industry indeed is worried, said Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association (TIPRO). "Kamala Harris has a long history of working against the fossil fuel industry, including filing lawsuits as attorney general, launching probes into U.S. energy companies, her well documented rhetoric to ban hydraulic fracturing and supporting an end to the filibuster to pass the Green New Deal, which she co-sponsored," he said by email.

How this will play out is a question, he added. "It's uncertain how reality will mesh with ideology and appeasement under Harris, but many believe she is to the left of President Biden when it comes to our industry, which is concerning given his track record."

MarketWatch sees it this way: "Investors should expect a potential Harris administration to defend the economic policies that Biden instituted during his term, including the Inflation Reduction Act's subsidies for electric cars and green-energy projects, increased IRS funding to pursue wealthy tax evaders, excise taxes on stock buybacks, and a 15% corporate minimum tax for large corporations."

Others have pointed out that, while Biden's 2020 campaign rhetoric involved a quick stop to offshore drilling, in practice it was only reduced, the change likely coming in view of political realities. Harris seems less likely to soften those kinds of policies.

Lakings: Energy Policy Is Cumulative
Industrial Info's Geoffrey S. Lakings pointed out that, while each succeeding presidential administration's decisions influence the industry, "I do not think policy will shift all that much under whoever steps into the Oval Office come January, 2025. From 'W' through Obama, Trump and Biden, the U.S. has grown to be the world's largest hydrocarbon exporter in the span of just a few years. Might we drill more on government lands, including Alaska? Maybe, but that doesn't matter."

Why not? "Because since the early part of this millennium, the industry has worked on improving processes, efficiencies, and productivity to get ever-increasing amounts of hydrocarbons out of the ground, to the ports and overseas," Lakings continued.

Cutting production would have consequences, he warned, "If we're not drilling, we continue to cede geopolitical ground to OPEC+ as well as the expanding BRIC (Britain, Russia, India, China and others) nations. Regardless of who's in the White House, my policy would be to drill everywhere that's reasonable, to make sure the world can rely on the U.S.'s economic and energy security."

Now or Never?
The challenge some see is that a Harris presidency could lock in some environmental policies, making it impossible for future presidents to relax them, said Reuters. Reuters quoted Kevin Brook, managing director of the Washington consulting firm ClearView Energy, as saying that Trump could conceivably use several options to reverse Biden policies, Harris could instead lock them in.

Oil Markets Ho Hum
Reuters also reported that oil markets on Monday seemed unphased by any production challenges offered by a possible Harris win. Both Brent Crude and West Texas Intermediate (WTI) dropped, WTI to its lowest level in a month, based on concerns about oversupply in coming months.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).