Big Oil Could Benefit from Obama Win
Regulations May Boost Natural Gas Demand
The presidential election was marked by Big Oil interests actively trying to instate Mitt Romney as President of the United States. Companies like Exxon Mobil (NYSE: XOM) spent millions in their efforts to paint another Obama term as something investors—and the country—could ill afford.
Instead, the newly re-elected President’s promise to expand demand for natural gas applications in the auto sector and create new power plants to raise domestic oil and gas output could end up helping these same companies.
“Facts are stubborn things and they often defy people’s ideology,” John Hanger, a special counsel at Eckert Seamans Cherin & Mellott, LLC in Harrisburg, Pennsylvania, and the former top environmental regulator in that state, said in an interview. Obama’s “policies on the demand side are most favorable.”
Although the Democrats are in the White House and control the Senate, Republicans retain control of the House of Representatives. That means we could see two things happening; one, legislation favoring Big Oil and natural gas industries could wrest prominence, and two, Democratic initiatives to regulate fracking or oil and gas production on federal lands are likely to run into stiff opposition.
President Obama, meanwhile, faces numerous pressures. Opposition to the controversial Keystone XL pipeline remains strong, and the EPA and Interior Department are already mulling over regulations to control fracking. These are issues the oil industry is crying foul over, claiming they will raise costs across the board.
Although energy companies contributed $115 million to the election, with more than 80 percent of it going to Republican interests, they are suddenly eager to compromise and work with the second-term President, whose election was often viewed as unlikely by the right wing.
Their biggest headache right now is the EPA, which has promised to continue raising measures against oil and gas, particularly to reduce the extent of fracking. The EPA’s immediate agenda is to push for rules tightening up greenhouse gas emissions from power plants.
If coal drops under the pressure of these regulations, that should only increase the demand for natural gas.
Moreover, the government has long anticipated pushing auto fuel efficiency regulations into place, which would create more incentive for the development and use of natural-gas powered vehicles.
Production of oil and liquid petroleum products is projected to increase more than 80 percent through 2020 in the U.S., and President Obama has made available extensive tracts of federal land for exploration and drilling.
The Keystone XL project, though, is bound to become the first major point of contention for the President’s second term. The pipeline could carry 830,000 barrels of Canadian tar sands oil per day to Gulf of Mexico refineries, but environmental interests have pointed out how it could damage water supplies in Nebraska.
Keystone’s first bid, by developer TransCanada Corp. (TSX: TRP), was accordingly shot down. Of course, the issue is far from settled.
Energy Demand will Increase 58% Over the Next 25 Years
After getting your report, you’ll begin receiving the Energy and Capital e-Letter, delivered to your inbox daily.