The dust from the battles between the two US presidential candidates has settled. Apparently, we can already admit that Joe Biden won the race. This candidate, in his campaign promises, paid a lot of attention to the development of green energy and reducing the demand for oil and gas. Does this pose a threat to the global hydrocarbon market and the Russian economy?
There was a lot of green in Biden’s campaign rhetoric. He spoke out against corporations getting rich from job cuts in the United States and environmental degradation, criticized Trump for removing tax breaks for clean energy, and proposed to actively fight climate change. His statements largely coincided with the postulates of European officials. For example, about striving for zero emissions by 2050.
But the greatest response in our country was found in Biden’s promises of investments in renewable energy. In the original, the promise was vague, but optimistic: allegedly Biden’s proposals in the field of climate protection and “environmental justice” could attract federal investment of $ 1.7 trillion over 10 years. Hence, numerous conclusions were drawn about the coming turmoil on the oil market. At the same time, it should come as a surprise that the intentions to obtain additional investments in green business from the private sector, state budgets and from local governments were ignored. Here Biden predicted an inflow of $ 5 trillion.
If we take seriously the election promises of the new US president, then his program indeed contains a large number of measures that can hit the global demand for oil. Recall that the United States is the largest consumer of black gold today; before the current crisis, it accounted for about 20% of total global demand. Therefore, the promises to complicate the life of traditional energy and traditional motor fuel (for example, to tighten the fuel consumption rates for passenger cars) cannot but cause concern among the countries – exporters of hydrocarbon raw materials.
Biden’s rise to power is seen as a risk for Russia. The United States may not be the largest buyer of our raw materials and petroleum products, but the reduction in demand in this country can create an oversupply in the world market, which can again lead to a rapid drop in prices. Fortunately, little depends on the individual heading the United States and his election promises.
The greenest president of the United States before Biden was Barack Obama. In his speeches, he paid a lot of attention to renewable energy sources (RES), strove to support them in every possible way and even promised that by 2015, 1 million electric vehicles would drive on the roads of the United States. But 2016 came, the elections were won by Donald Trump, and only 404 thousand of these cars drove on the roads of the United States. The desired million was achieved only in 2018.
In addition, under Obama, who championed solar and wind energy and defended a defenseless climate with all his might, domestic gas and oil production began to skyrocket in the United States. Hydrocarbon production was at record highs. The US has even started exporting liquefied natural gas.
Trump rose to power as an oil, gas and coal president. Coal production increased slightly in the first year of his reign, but since 2018 has rushed down again, updating multi-year lows last year. This year, by the way, does not promise any positive changes in this area either. The reason for the decline is a sharp decline in domestic demand due to the displacement of coal from power generation by gas.
Oil and gas under Trump did start to skyrocket after the fall in 2015-2016. But the growth dynamics was not ensured by the will of the new president (nevertheless, some recovery began under Obama), but the OPEC + deal and a favorable price environment. This can be seen especially eloquently in the indicators of 2018. While oil was growing from $ 60 to $ 85, production in the United States rose by a phenomenal 1.5 million barrels per day. As soon as prices fell, the rate of production growth also slowed down.
At the same time, it is especially ironic that, according to BNEF, 2017 and 2019 were record years for the United States in terms of investment in renewable energy sources.
In other words, a presidential candidate can promise anything. And when chosen, that same person may sincerely desire to fulfill their promises. But there are objective conditions in which economic activity is conducted. They depend little on the will of an individual, even if it is the entire president of the United States itself.
Particularly interesting is Joe Biden’s pledge to cut subsidies for fossil fuels. Yet the United States today is also the largest oil producer. Before the crisis, they provided 13% of world production. Even if demand from the United States begins to decline, if the fall to zero occurs in an absurdly fast 15 to 20 years, supply will also decline. Therefore, the possible surplus on the world market will amount to 7-8 million barrels per day.
If, in spite of the accumulated experience, take Biden’s promises seriously, then one cannot fail to notice that we have China, which does not fall into green radicalism, but systematically, by about 0.5 million barrels per day per year, is increasing the demand for oil. If this rate is maintained, it will take about 14-15 years to catch up with the surplus that the United States seems to be preparing to create on the world market.
Author – Deputy General Director of the Institute of National Energy
The editorial position may not coincide with the opinion of the author