What a Trump Presidency Means for the Oil Industry

By Scott Huntington

History shows what’s said on the campaign trail often isn’t the best predictor of what actually happens when a president is in office. Priorities change, new situations arise and promises are broken. That historical truth makes predicting what Donald Trump’s upcoming presidency means for oil a difficult task.

However, the future isn’t completely shrouded in mystery. Here’s what we know about Trump’s positions and the impact they can have on oil production and prices.

Higher production

A point president-elect Trump mentioned often on the campaign trail is his desire to make the U.S. energy independent and no longer reliant on foreign oil. That’s a lofty goal that’s not easy to attain. However, what’s more feasible is his plan to limit regulations in order to encourage more oil production in the U.S.

That desire to create jobs in the U.S. by making it easy to drill and create pipelines seems to have resonated with voters. It also resonated with Wall Street, as stock prices for oil companies rose at the news of his election.

The problem for U.S. producers, say some experts, isn’t so much the regulations but the ongoing low prices for oil. Drilling doesn’t make much economic sense when the price of oil hovers at a low $50 per barrel. It’s those low prices that benefited people at the pumps but rocked the oil industry with layoffs, company closures and low share prices.

However, there are factors beyond the presidency to consider.

The OPEC factor

The Organization for Petroleum Exporting Countries (OPEC), an international cartel of countries, is often blamed — or credited, depending on your point of view — for the steep drop in oil prices over the last several years. Up until recently, OPEC made few efforts to cut production in order to prop up oil prices. There are theories floating around that it did this to hurt non-member countries.

Reports state that OPEC is bracing for continued low prices in light of the Trump presidency. If that’s the case, then it might take action in an effort to prop up prices.

The good and the bad

Lots of factors go into determining the price of oil, but increased production both in the U.S. and worldwide means prices will remain low. That’s excellent news for commuters and travelers, but bad news for the oil industry.

It’s also bad news for proponents of renewable energy, as low gas prices tend to stifle the desire to develop new technologies. Trump's support for renewable energy seems limited at this time, which is good for oil producers and not so good for sustainability advocates.

Still, it’s too early to tell what sort of impact a Trump presidency will have on oil. He has yet to be sworn in, and global conditions can sometimes be a bigger contributing factor to oil than even the American president.

As it stands, it looks like low prices will stick around for a while. That would have likely been the case regardless of the election, but it seems like Trump will have an impact on making those low prices last even longer -- for better or for worse.

Image credit: Flickr/Soliven Melindo