Over the weekend Joe Biden won the US election to become the 46th President of the United States. This blog summarises the potential impact of the Biden administration on global energy markets.
Oil & OPEC
The US is the world’s largest oil producer, President Trump has pro-actively worked with OPEC and its partners to manage a global oversupply of oil through the Coronavirus pandemic.
The global oil market has been temperamental over the last four years, with President Trump influencing OPEC to increase supply when oil prices threatened to reach $100/bb
l and also to cut production when global demand diminished at the height of the coronavirus pandemic.
The main difference in policy is likely to affect Iran and Venezuela which accounted for a reduction of c3% in the world’s oil supply when President Trump reinstated sanctions on Iran in November 2018 and imposed sweeping sanctions on Venezuela in August 2019 following international claims of illegitimacy of the country’s President. Any change in policy paving a way for Iran and Venezuela to export more oil may see further increases in global supply adding bearish pressure on oil prices.
Paris Climate Agreement
In 2016, 174 states plus the European Union signed the Paris Climate Agreement with the aim of limiting global warming to below two degrees Celsius. The Agreement gave all countries a framework to avoid the dangerous impacts of climate change in the future. The framework includes rich countries committing to provide billions of dollars to help poor countries deal with climate change and its effects.
President Trump filed The United States intent to withdraw from the agreement on November 4th, 2019 with the US formally withdrawing one year later. Biden has already vowed to re-enter the US back into the Paris Climate Agreement as soon as his tenure begins.
Net Zero and Renewable Technologies
Biden has already announced a $2 trillion clean energy and infrastructure plan with the aim for the US to achieve a net-zero emissions by 2050. Specifically, on energy, Biden’s aims are for the US Power sector to be free from carbon by 2035. This policy may be met with opposition as the US has the largest reserves of coal on the planet.
Transport and electricity account for approximately 50% of US greenhouse gas emissions. Trump’s administration had moved to weaken US emissions target requirements including the country’s transport sector.
Biden’s view is that climate change is a real threat to the planet, and that a transition from dirty fossil fuels should be perceived as an economic opportunity if the United States moves fast enough to become a leader in the clean energy technology sector.
Whilst Joe Biden’s Democrats control the Presidency, the Republicans control the Senate meaning attempts to pass legislation to truly change the US strategy on climate change may prove difficult.
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