Trump & Oil: Conflicting Policies
After months of political bickering and tug-of-war, Donald Trump was elected the 45th president of the United States. All eyes are now fixed on the political and social aspects of the ramifications of Trump's election win. An issue that would largely contribute to the US's future relations with many countries is oil, and Trump's oil policy.
Trump's oil policy would easily result in closer relationship between the US and oil producers or consumers or even give rise to differences between them.
This article aims at reviewing Trump's oil policy in a bid to highlight some possible consequences of his election victory for the oil market.
With the victory of Donald Trump in the US presidential election, stock markets' indices nosedived across the globe. But oil markets were up. This rise in oil prices was not due to Trump's oil policy, but emanated from his shock win in the race for the White House. Therefore, Trump's election could not be interpreted as the cause of increase or decline in the oil price. However, in order to study the future of oil market, it is necessary to examine Trump's oil policy.
In his election campaign, Trump expressed several important points about his oil policy. These remarks would lay bare his possible policy and challenges lying ahead in the energy sector.
Halt to Saudi Oil Imports
One of Trump's election pledges in the oil sector was to call a halt to oil imports from Saudi Arabia. This promise is unlikely to come true for a variety of reasons.
First, if Trump intends to lead the US towards independence of Saudi oil the relations between Washington and Riyadh will go towards degradation. This is the case while over the past decades the US has been looking at Saudi Arabia as its close ally in the Middle East. Any degradation of Washington-Riyadh ties could cause a major change in the US Middle East policy. That is largely unlikely at least in the short and medium-term.
Second, Saudi Arabia is the largest supplier of oil to the US in the Middle East and the US significantly depends on oil imports from this country. Therefore, the US is not able to cut its dependence on Saudi oil overnight. Even if Trump desires to embrace such a policy, he will need long time to find an alternative to Saudi oil. For example, if Trump is serious in following up on the resumption of the construction of Keystone Pipeline, whose construction was halted by President Barack Obama in 2015, he will draw the dire of many groups particularly environmentalists.
The Keystone Pipeline System is an oil pipeline system in Canada and the United States, commissioned in 2010. It runs from the Western Canadian Sedimentary Basin in Alberta to refineries in Illinois and Texas, and also to oil tank farms and an oil pipeline distribution center in Cushing, Oklahoma. The pipeline came to a greater prominence of attention when a planned fourth phase, Keystone XL, attracting growing environmental protest, became a symbol of the battle over climate change and fossil fuels, and in 2015 was rejected by the Obama administration.
Keystone Pipeline would be able to carry 800,000 b/d of oil to the US, which would halve the US oil imports from the Middle East; however, that would not happen in the short run and the US will continue to remain dependent on Saudi oil.
Third, Trump who has a long background in business will not ignore the advantages of importing oil from Saudi Arabia. In other words, the business advantages of oil imports from Saudi Arabia will convince Trump, like his predecessors, to keep buying oil from this Middle Eastern Arab state.
Full Oil Independence
One of Trump's campaign pledges was to bring about full oil independence instead of importing crude oil from those whom he described as enemies and oil gangs. It seems that in case Trump plans to live up to his promise of US's energy independence of any oil rival and cartel and moves towards making US energy independent he will run into numerous challenges with oil giants that could hinder his efforts. For instance, generation of energy distribution crisis or price hike are among approaches which oil cartels may adopt vis-à-vis such a policy. ExxonMobil and Chevron, which are to major oil companies in the US, seem to be determined to resist Trump's plans and not allow him endanger their influence on and interests in international markets. Therefore, materialization of this election pledge by Trump will be facing problems and challenges.