With less than 3 weeks to go before the inauguration of the second Trump administration in the US, analysts in the energy sector are eagerly looking forward to hearing what the president-elect Trump will spell out with regard to his energy policies.
During the campaign, President Trump, time and again, promised to halve the cost of energy for the average US consumers, while identifying the former as the root cause behind the rampant inflation.
His solution was not rocket science; on the contrary, it is letting the central pillar of economics take care of itself: produce more fuel, flood the markets and prices will be automatically settled at values, favourable mainly to consumers.
When the faithful asked how he was going to do it, he simply said, time and again, 'Drill, baby, drill', triggering off bouts of laughter from the loyal audiences: with that motto, President Trump wanted to deregulate the existing mechanisms that get in the way of issuing permits, releasing Federal lands for more oil drilling and encourage more companies to embark on the mission.
President Trump may have been emboldened by the fact that the US has been the biggest oil producer in the world for the past 6 years; in 2023, for instance, the US produced 12.9 million bpd, when the global production was 96.4 million bpd - nearly 14 % of the global oil production; by October, 2024, the US oil production has reached a staggering 13.457 million bpd, securing an unassailable lead over its rivals in the OPEC+.
With a series of consolidations and impressive innovations to enhance efficiency, the US shale oil producers have mastered the art of sustainability in the long run, despite the many challenges posed by the environmental lobbies on one front and questionable practices of the OPEC in the past; having learned the lesson of risks involved in exponential expansions on impulse, the industry has been exercising caution as never before while letting it grow at a healthy pace.
At present, Texas and New Mexico are the two states that make the largest contribution to the US crude stocks; Permian Basin, meanwhile, stands out as the biggest region that drives the growth of the US crude oil production.
The contribution of the US along with other non-OPEC+ members such as Brazil and Guyana, meanwhile, managed to offset the impact of the production cuts made by the OPEC+, especially Russia and Saudi Arabia in order to shore up the falling global oil prices.
Although the price of crude oil was slightly higher in the first few days in the New Year, analysts do not believe it will stay that way for long: on one hand, the prices went up despite a build in the US crude stocks; on the other hand, some investors still pin their hopes on yet another stimulus package by China to revive its own economy that in turn will lead to an increased demand.
The recovery of the Chines economy, the word' second largest, however, will be determined by how will China and the US get on in the coming months; during the first Trump term, the relationship between the two economic giants left much to be desired, as it was riddled with tit-for-tat measures adopted by both sides.
As far as the crude oil markets are concerned, analysts, meanwhile, believe President Trump will put pressure on China to shun the cheap Iranian oil, without risking levies being heaped on the Chinese goods.
At present, President Trump seems to be holding his cards close to chest, when it comes to announcing his energy policies, perhaps, without letting the incumbent spoil the show.
He, however, appears to be harbouring ambitions beyond the US when it comes to global fuel supply: for instance, he picked on Sir Keir Starmer, the British prime minister, this week over cutting down on the North Sea oil and gas production by Britain; the former wants to get rid of windmills, something that the ruling Labour party is very keen on erecting on shore as well in order to meet its own climate goals.
In addition, his position on the Canadian oil imports across the border is not clear either; he has already threatened to import 25% tariff on the Canadian goods for Canada's failure to secure the border between the two North American neighbours, on the very first day in office; whether that includes crude oil too, however, remains to be seen.
As for gas, President Trump warned the EU recently that if the bloc does not buy the commodity from the US, there will be tariff on the goods coming from Europe to the US, citing the trade deficit that approximately stands at US $131 billion.
All in all, it may not be easy for China and the EU to be engaged with the US on the basis of business-as-usual after January 20, as President Trump will pursue an America-First strategy, clearly much more aggressively than he did during the first term in office; his energy policies will leave many Western leaders in an uneasy lurch for prolonged periods of time, unless the former evolve in line with the thinking of the Republican Party of the US.
