Oil and Gas Sector Likely to Fare Well Under Trump
A lighter hand in environmental controls bodes well for oil and gas producers.
For global energy markets, the potential knock-on impacts of a Donald Trump presidency could be meaningful in a few areas. With respect to U.S. oil and gas producers, we can say that the tail risk for regulation of hydraulic fracturing and methane emissions is now somewhat lower. Thus far, the Environmental Protection Agency has maintained that the systemic environmental impact of hydraulic fracturing is benign. A Trump-led EPA is less likely to reverse this view than a Hillary Clinton-led EPA. More tangibly, certain high-environmental-impact upstream segments could benefit from a lighter touch, such as sand mining to supply hydraulic fracturing proppant. Overall, however, state and local governments rather than federal authorities have had the lion’s share of impact on upstream economics.
Additionally, exploration and production firms producing in areas with disadvantaged transportation economics due to incomplete pipeline infrastructure could benefit if Trump-led regulatory agencies accelerate approval of new projects (for example, the controversial Dakota Access Pipeline, which would service the Bakken). We also believe the likelihood that pipelines carrying Canadian heavy oil to the United States, such as Keystone XL, will proceed has increased, which could address the potential takeaway issues that loomed on the horizon for Alberta’s oil producers. However, Trump’s desire for the U.S. government to capture a bigger piece of the profits could be a barrier to breaking ground on new pipeline infrastructure.
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