Drill, drill, drill? What a second Trump presidency would mean for oil and gas

It is received wisdom that, should he become president this fall, Donald Trump would seek to dramatically boost oil and gas production while shredding recent energy policies enacted by Joe Biden.

Drill, drill, drill continues to be the Trump mantra. Are we at risk, though, of overstating Trump’s ability and desire to drive such change? And does that underplay aspects of Biden’s record on oil and gas production?

Let’s look first at the controversy over LNG.

Trump heavily criticized Biden’s decision to temporarily pause pending decisions on LNG export projects to non-FTA countries. “This decision to block the approval of new facilities to export American natural gas…will further undermine America’s economic and national security,” said Karoline Leavitt, Trump’s campaign press secretary. “On day one, President Trump will unleash American Energy to lower the cost of living for all Americans.”

It’s great rhetoric – and yet the impact of a pause on LNG upstream production in the near- and mid-term will likely be limited. Only four of 17 slated projects — Venture Global’s Calcasieu Pass 2 (CP2), Delfin LNG, Lake Charles LNG, and Commonwealth LNG — are close enough to FID to have their timelines affected. None would begin exports until 2028 at the earliest, notes Columbia University’s Center of Global Energy Policy.

The seven operating US export terminals, and a further five under construction, would be unaffected by the Biden policy, or indeed by its reversal.

Offshore leases

Last September, Biden announced a record low number of offshore leases, with just three lease sales in the Gulf of Mexico between 2025 and 2029. The first Trump administration had proposed 47 such sales.

Indeed, Trump pledged to “end Biden’s delays in federal drilling permits and leases that are needed to unleash American oil and natural gas production.” A McKinsey study found that production in the Gulf of Mexico could decline from 1.6 million barrels per day (mmbd) in 2024, to 1 mmbd by 2030, without further investment. The Biden administration has also cancelled some leases issued in Alaska and paused sales of leases on federal lands — although the latter order was struck down by a federal judge.

Despite these moves, upstream production of oil and gas has grown during Biden’s presidency, according to recently released data from the Energy Institute, as shown in the chart above.

There is potential for more growth, subject to international pricing and capital discipline by operators when making investment decisions.

“We are not about going after volume,” said ExxonMobil CEO Darren Woods at the firm’s full year results in February.

EVs and auto demand

US gasoline demand could be cut by 21% below 2022 levels, to 2,200 million barrels of oil equivalent (mboe) by 2030, according to Department of Energy (DoE) modelling, because of incentives for Zero Emissions Vehicles (ZEVs) found within the US Inflation Reduction Act (IRA), and tighter Environmental Protection Agency (EPA) emissions standards. Trump promises to “roll back every Biden administration mandate that is brutalizing the American auto industry.”

But efforts to do so could be blocked at the state level.

When the prior Trump administration replaced the Obama administration’s Clean Power Plan (CPP) with the Affordable Clean Energy (ACE) rule, a coalition of 29 states and cities sued to block the easing of restrictions. In 2021, the US courts of appeals found in their Favor.

Many automakers are committed to EV plans. In 2020, General Motors opposed Trump’s effort to stop California from setting fuel efficiency standards, and the majority of the firm’s capital is now spent on developing ZEVs.

Tax credits on renewable components

Biden’s IRA provides tax credits to manufacture solar, offshore and onshore wind energy components. The rules offer a choice of Investment Tax Credits or Production Tax Credits for renewables projects to be in place until either US electricity sector carbon dioxide emissions reach 25% of 2022 levels, or the year 2032, whichever occurs later.

Trump promises to revoke the IRA’s tax credit regime. He conveyed similar rhetoric in his first term, while keeping Obama’s tax credit regime for wind and solar in place.

Something similar may happen again noted John Ketchum, CEO of renewable developer NextEra.

“It’s really hard to overturn existing law,” he said in January. “The IRA benefits both sides of the aisle. [And] if you think about where the investments are being made around [the] IRA and where a lot of the benefit of [the] IRA is flowing, it’s flowing to Republican states and it’s flowing to parts of those states that are really difficult to stimulate economically.”

Methane standards

Earlier this year, the Biden administration announced new rules on methane emissions for oil and gas companies, requiring them to eliminate routine flaring of natural gas, monitor for leaks, and replace high-emitting equipment.

The Trump campaign has not explicitly promised to overhaul the rules, although Trump’s previous administration lifted similar regulations requiring firms to detect and repair methane leaks. Other rules that could be repealed include a recent Securities and Exchange Commission (SEC) regulation that require firms to disclose Scope 1 and Scope 2 emissions. “The rule will allow climate crusaders in investment firms to punish companies that do not conform to their radical environmental agenda,” according to the Trump campaign.