AMERICAN SHALE OIL AND GAS INDUSTRY SET FOR IMMINENT BOOST
Donald Trump as US President could mean global crude oil prices staying in the goldilocks range of $45-$60 a barrel. That’s primarily because US shale oil and gas — that since 2014 has disrupted the cosy world of traditional oil producers led by Saudi Arabia — will get a shot in the arm from Trump’s ‘America First’ world view.
The US President-elect, also known for his pro-business leanings, will likely make things easier for US shale oil and gas producers.
Trump’s coming to power could mean financial incentives, tax breaks and easier land and environmental clearances for US shale producers. Over the past few years, shale has helped the US turn from an oil and gas importer into an exporter, securing its energy independence and adding to its geopolitical heft.
The US, especially under Trump, is unlikely to let go of this advantage, given the evolving dynamics in West Asia.
Over the past couple of years, relations between the US and Saudi Arabia have turned testy on several issues — for instance, on the nuclear deal with Iran and on the conduct the war in Syria and Yemen. There could now be more strains in the relationship, especially given Trump’s strong comments about Saudi Arabia’s commitment to the war against ISIS and his opposition to the immigration of Muslims into the US.
Shale producers in the US have, for some time now, been on the back-foot due to the Saudi policy of upping production to maintain market share while pushing down prices. The resultant sharp drop in global crude oil prices to below $30 a barrel earlier this year led to many US shale players shutting shop. Prices have since risen to about $45 a barrel.
Also, more respite could be on the cards from the recent OPEC decision to cap crude oil output to prop up prices — low prices not only hurt US shale producers but also put severe pressure on OPEC members such as Venezuela and Saudi Arabia itself (despite its deep pockets).
This, along with a weakness in the dollar, at least in the near term, from global nervousness about Trump’s presidency, should support oil prices. Add to this Trump’s likely policy support that could lower costs for US shale producers.
Ergo: these producers will be in a better position than before to compete with traditional oil producers. That said, more US shale production in an already oversupplied market could keep a cap on global oil prices at about $60 a barrel