US Domestic Politics on Crude Oil. Obama out. Trump in.
This article will focus on the politics and policies of Barack Obama’s last few days in office and what President Elect Donald Trump has planned for the future on domestic crude oil polices. Oil traders should always pay close attention to these key decision makers which see crude oil as a national interest and not just as a commodity. Please also have a look at the educational tab of Financial Trading Explained, where you will find our article “Crude Oil Trading Explained” where all the basics of crude oil trading are covered.
United States of America
I would like to focus on the past and future policy decision of these US Presidents. Undoubtedly the biggest change will come from the old president Barack Obama going out and the new president in 2017 being Donald Trump.
Barack Obama, the politician. I remember watching the crude oil price collapse in 2014 and all the big oil players acting on it. One thing that surprised me is that Barack Obama didn’t really worry too much about America’s huge domestic fracking industry. Fracking is an expensive way of extracting crude oil from the ground in comparison to more traditional ways, hence if the crude oil price isn’t high enough producers simply stop drilling as it stops being profitable. At first I thought it could have been an environmental decision but government policy seems to have had another additional reason, energy security. Simply put America could enjoy cheap energy from abroad, while keeping their own crude oil in the ground. Barack Obama’s policy seems to have been a political call rather than a business decision.
In his last few days in office he has also called for a permanent block on new drilling and mining contracts. In doing so, Barack Obama hopes to secure his legacy as an environmentally conscious president. The areas which are covered by this ban are the US coastal waters in the Atlantic and Arctic. President Trump will maybe try to reverse this ban by going to court about this matter as the area blocked is vast in size and probably has immense reserves in oil and gas.
Donald Trump, the businessman. You probably anticipate where I am going with this. This is one thing he prided himself on during the recent presidential election, Donald Trump is a businessman and not a politician. His policy seems to be on deregulation and on top of this, he is also not big on the environment. Global oil prices will play their part on how much the Americans are going to drill, but deregulation will drive down the cost of drilling which should make it more attractive. President Donald Trump is looking at Rex W. Tillerson, current CEO of Exxon Mobil as Secretary of State, this should already make his policy clear, the US is open for business.
It is clear to see that the new president Donald Trump will try to reinject new life into areas such as the oil and gas industry. If he wants to keep his election promise of bringing jobs back to America he will surely try to deregulate and see employment pick up in oil and gas. The only problem he will face is if he will increase supply again by domestic polices, as this will have a negative effect on global crude oil prices.
Explained by Stefano Ceacmacudis