Over the past several days, the Texas Standard has been exploring the implications of the elections. One thing President-elect Donald Trump made clear on the campaign trail is that he’d be taking a pro-oil stance when it comes to energy, shunning much of the Biden administration’s initiatives to shift energy production toward renewable sources.
Energy analyst Matt Smith joined host David Brown to take a look at what a second Trump term might mean for the oil and gas industry.
This transcript has been edited lightly for clarity:
Texas Standard: I notice that oil prices, we’re seeing a sell-off in the aftermath of Donald Trump’s election. What does that mean, exactly?
Matt Smith: So we’ve had a lot of volatility just across financial markets. Right? So we’ve seen a lot of whipsawing in bond prices as they adjust to inflationary expectations of the Trump administration. And we’ve also seen the US dollar rally really strongly.
And you typically see an inverse relationship there where when it’s a stronger dollar, there’s a weaker oil price. And so we have been seeing that. We’re even seeing that today here. But it also may be just a little bit of easing of geopolitical tension. But for now, oil prices have dropped below $70 on a WTI basis.
I noticed that a lot of what we were hearing from the campaign trail – and not just from Republicans but from some Democrats as well – is a sort of version of drill, baby, drill or frack, baby, frack, that sort of thing. What do you think some of the key policies will be going forward in this second Trump presidency? And you’ve got to consider what’s happening on Capitol Hill as well, I guess.
Yeah, sure. So a lot of Trump’s policies are inflationary – and they would have been with a Harris administration as well, but more so with Trump, just because of tax cuts, because of possible tariffs on China and on Europe, which would result in higher prices. And then also with immigration and how that could cause labor shortages.
So all of those things are inflationary, and that causes commodity prices to rise as well. So oil would get swept up with that, it would seem.
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What’s the sort of macro picture, though? I mean, we’ve seen renewable energy sources really make some pretty big gains in the past four, five, six years. Texas is No. 1 in renewables right now. What do you think’s going to happen in the next four?
The challenge is, right, well even just at Trump’s victory speech, he said, “we have more liquid gold than any country in the world.” So we know that energy and fossil fuels are going to be a priority of his. So he is likely to withdraw the US from the Paris climate agreement. That would be for a second time; he already did that in his last term. And that agreement is to slow the rise of global temperatures.
He’s also going to try and unwind some of Biden’s climate policies as well, as well as likely introduce measures to boost fossil fuel production. But at the same time, as you point out, there’s such a momentum behind renewable fuels here and renewable sources that it’s unlikely he’ll be able to derail everything. But he will definitely have more of an influence on the fossil fuel side of things here.
Let’s take a look at Iran. What should we expect when it comes to dealing with that country? Of course, this is tied in with tensions more broadly in the Middle East and what’s happening with Israel.
For sure. So Trump is likely to rekindle his positive relationship with Saudi Arabia and potentially Russia, too. And this is likely bad news for Iran with the Saudi side of things, because Saudi and Iran are adversaries, and hurting Iran would not only curry favor with Saudi Arabia, but if the Trump administration looked to reduce Iranian crude exports or production via sanctions, it could also ask for Saudi Arabia to ramp up production and exports to fill that gap there.
So it’s something that the Saudis and OPEC would be more than happy to do there. So it seems that President Trump is going to go after Iran.
