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October 21, 2020

FBS, Trump and Biden. Who supports the Oil Industry?

Can Biden’s Victory Help Oil? Where will oil prices move during the period before the Elections?

Trump-and-Biden.-Who-supports-the-Oil-Industry Trump-and-Biden.-Who-supports-the-Oil-Industry

Can Biden’s Victory Help Oil?

Yes, it can.

Despite the fact that Joe Biden pledged to promote a greener economy and increase regulation, there are reasons to believe that oil prices will go up if Biden becomes America’s next President.

How so? If costs of shale production go up and the USD weakens, oil supply will diminish.

This will push prices up.

The regulations and taxes may raise production costs of the US shale barrel by $5, according to analysts in Goldman Sachs.

If Donald Trump is re-elected, the impact “would likely remain modest at best”, the bank said.

Thanks to the shale oil revolution, the United States is currently the largest producer of crude oil in the world.

What awaits this industry given the upcoming US election?

The global oil industry is suffering from the damage caused by the coronavirus.

The US shale oil is going through a harsh year between debts, prices collapse, and the wave of bankruptcies due to the consequences of the pandemic.

Finally, the US presidential election on November 3 may bring radical adjustments to the oil market if the White House policy changes with the victory of the Democratic candidate, Joe Biden, who prefers clean energy sources.

Sometimes Biden favors shale oil.

At other times, he is against it.

As for President Trump, he confirmed his support for US oil, but throughout the pandemic, his administration faced accusations of abandoning it.

What are the expectations for oil in the coming period and after the elections?

Which candidate is better for it: Trump, who stands on its side, or Biden, who loves the green economy?

Presidential Election: How does it affect US Economy and Markets?

What are the most important Expectations for Oil Prices?

1. Goldman Sachs: Biden’s victory is bullish for oil!

“We do not expect the upcoming US elections to derail our bullish forecasts for oil and gas prices, with a Blue Wave likely to be in-fact a positive catalyst,” according to Goldman Sachs.

The bank predicts that under Biden’s tightening on regulations, taxes, and restrictions on methane, and new oil drilling operations, the price of a barrel of shale oil will rise by about $5.

With the increase in costs, supply will decrease, and this will definitely raise prices.

The expected weakening of the dollar under Biden will also support oil’s rally.

In case President Trump is re-elected in November, the impact of the re-election “would likely remain modest at best” because the focus of investors will be far from fossil fuels.

2. Where will oil prices move during the period before the Elections?

Brent crude is likely to trade in the range between $40 and $43 a barrel as the US election approaches on November 3 and even beyond this date.

Some believe that these levels will continue until the end of 2020.

What’s happening? US Presidential Elections and Supreme Court

What does Donald Trump’s victory mean for US and global oil?

1. Trump’s View on Oil

President Trump has always shown his support for gas and oil and called for increased production.

The oil industry saw strong job growth during his term, although there was some criticism.

Trump opposes attempts to curb global warming, as he withdrew the US from the 2015 Paris climate agreement, arguing that it would impose “draconian financial and economic burdens” on the US.

He doesn’t support fighting climate change.

Trump’s plan revolves around “energy dominance” by maximizing the production and export of hydrocarbons such as natural gas and petroleum, and his administration has focused on removing regulatory barriers.

2. Trump’s Policies on Oil

Trump promised to support the oil industry during the price collapse at the beginning of the Coronavirus pandemic and proposed the idea of bailouts for the affected companies.

Trump claimed to have saved the industry and created the US current place as a major oil exporter and the world’s largest crude oil producer.

Trump’s administration has loosened nearly 30 important environmental regulations.

If he is re-elected to a second term, his officials will continue to pursue deregulation and will seek to increase oil, gas, and coal production.

Opening up new areas for oil and gas development, including the eastern Gulf of Mexico and a portion of the Arctic National Wildlife Refuge in Alaska, is one of Trump’s particular goals.

3. Impact On The Market

Despite Trump’s promises, shale oil-producing regions said that the help from his administration during the price crash was insufficient.

The stimulus packages passed during the shutdown excluded oil companies from support, prompting Republican lawmakers to file a complaint to the Treasury in July.

Trump’s re-election means continued easing of policies and regulations, which will unleash the US full oil and gas energy production capacity.

However, if the Trump administration continues ignoring oil companies, the industry already affected by the pandemic will be more damaged, expanding the circle of bankruptcy.

4. Dealing with OPEC

Trump is likely to continue managing oil diplomacy through Twitter, which he started in his first term to push (OPEC +) producers to either increase or cut supply.

He takes credit for helping to end the oil price war between Saudi Arabia and Russia.

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What does Biden’s victory mean for US and global oil?

1. Biden’s View on Oil

Former Vice President Joe Biden’s position on environmental and energy policies is clear.

He sees climate change as an “existential threat,” and has pledged to bring the US back to the Paris Agreement.

His stated goal is to “unleash the clean energy revolution in America”, to put the country on the right track to reach a carbon-free power sector by 2035, and net-zero emissions economy-wide by 2050.

Biden said he would make sure fracking was banned.

However, he hasn’t provided any concrete evidence of the fulfillment of these promises and has deliberately refused to provide more specific plans.

2. Biden’s Policies on Oil

Biden should coordinate the needs of his original voters who support clean energy with the interests of business.

However, his campaign site doesn’t discuss the shale oil industry in detail, but rather offers a complete plan to enhance the role of renewable energy and its use for power generation and job creation.

Biden doesn’t want to stop shale oil production completely.

However, he seeks to impose restrictions on increasing production in addition to ending the renting of new areas for oil and gas development, a ban on new projects and drilling operations on US federal land, tighter regulations, and increased taxes.

He would also cancel some of the easing restrictions that were passed under the Trump administration and would impose new “tough” restrictions on methane leakage and flaring.

3. Impact On The Market

What does Biden’s avoiding fracking mean to the market?

Biden wants to take action to fight climate change.

He will also invest in new technologies to boost the use of clean energy, such as solar and wind energy.

This may affect oil demand, and tax incentives offered to clean energy users could harm shale oil producers, who will struggle with the new restrictions.

On the other hand, higher costs of oil production may reduce supply, which will push up prices for some time.

4. Dealing with OPEC

Under Biden, any US diplomacy toward OPEC will be done behind closed doors.

Any renewed interest in antitrust legislation against OPEC will only happen if gasoline prices rise, which isn’t expected through 2021.

5. Sanctions and the Global Oil Market

The approach of the next US president towards Iran will have the largest impact on global oil supply because it means the potential return of two million barrels per day of Iranian oil to the market.

This may happen either in case of Biden’s victory and re-joining the nuclear deal or through unexpected direct talks led by Trump in his second term.

Conclusion

the US election in November will mark a significant turning point for the global oil market.

Trump’s second term means the continuation of the US shale revolution.

Conversely, if Biden is elected, the US oil industry will decline slightly, while Biden will try to return the United States to lead the world toward clean, sustainable energy.

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