Trump’s promises to shakeup US energy face a reality check

Throughout the election campaign, President-elect Donald Trump had launched fierce attacks on what he called the Obama-Clinton energy policies which he described as “anti-energy orders” that had “weakened our (US’s) security” and kept the US dependent on foreign sources.

In line with traditional thinking of the Republican Party, Trump had also frequently expressed scepticism about climate change, which he once called a “hoax” created by the Chinese to retard US economic development. Accordingly, he had debunked green energy as being promoted due to a supposedly erroneous link seen between carbon emissions and climate change. He had said that solar energy had a payback period of 32 years, and had described wind farms as “industrial monstrosities” sustained by government subsidies.

During the campaign, Trump had said he would “cancel” the US’s adherence to the Paris climate change accord and use the billions of dollars payable for climate change programmes to take care of water and environmental infrastructure at home.

Trump’s energy vision

Given this background, the US oil industry is now confident that the Trump presidency will prioritize the development of fossil fuels at home, promote cross-country pipelines and remove environmental protections in a holistic overhaul, in short, completely overturn the policies of the Obama administration. The head of the hydrocarbon industry’s trade group, the American Petroleum Institute (API), sees in this new approach the beginning of the “American energy renaissance.”

There are widespread fears among environmentalists that all rules and actions of the Environment Protection Agency (EPA) are likely to be under scrutiny, including the Clean Air Plan, limits on ozone pollution, fuel efficiency standards and regulations relating to drilling technologies. They promise to “build a wall of opposition” to stop Trump from pursuing what they call this “big polluter assault.”

Observers believe that the first projects to be approved by the new president will be the stalled pipelines - the 1800-mile Keystone XL pipeline from Alberta to Nebraska and the Dakota Access Pipeline, both of which have been stalled due to environmental concerns. Trump’s energy vision also calls for a major expansion in the use of federal land, onshore and offshore, for coal, oil and gas exploration and development, opening the eastern part of the Gulf of Mexico, the Pacific and Atlantic coasts and Alaska for offshore drilling, all of which have been opposed earlier by local communities.

However, commentators believe that Trump’s plans for a massive expansion in domestic exploration and production will face several hurdles, particularly the high costs and long gestation periods. The present and prospective low prices and an over-supplied market will hardly encourage the funding these projects call for.

‘Energy independence’

Trump had spoken in the campaign of making the US “energy independent,” while creating millions of new jobs by developing the two trillion barrels of recoverable oil that are believed to be available and can meet US needs for nearly 285 years.

He had been particularly harsh on OPEC, he accused it of illegal “price fixing” and promised not to import oil from OPEC members, noting that some of them were enemies of the United States.

However, Trump’s anti-OPEC remarks are likely to have been electoral bombast rather than presidential policy. While US imports of oil have certainly gone down to just a quarter of its needs (compared to 88 percent for the European Union), the country still imports seven million barrels per day, of which 40 percent comes from Canada and 31 percent from OPEC members; OPEC production contributes just 15 percent to the US’s daily consumption. But, this cannot be replaced by domestic production since shale oil tends to be light while imported oil is heavier and essential for blending purposes.

In any case, since the world oil market is a single “global” market and prices are determined globally, it makes no sense to talk of “energy independence.”

Three weeks after the election results, Trump has said he has an “open mind” on the Paris climate change deal, seeing “some connectivity” between human activity and global warming. As Trump withdraws from some of his election rhetoric, the realities and complexities of the global energy scenario will certainly require him to review most if not all of his energy pronouncements of the election campaign.

___________________

Talmiz Ahmad is the former Indian Ambassador to Saudi Arabia, Oman and the UAE.

Save