If he wins in November, former President Trump may find it easier to boost demand for energy than to increase supply

Ed Crooks, Vice-Chair, Americas, Wood Mackenzie

“Nothing is more uncertain than the general public,” the Roman orator Cicero said, and it is as true now as it was in 62 BCE. The next US presidential election is still almost 10 months away, on 5 November, and we can expect plenty of twists and turns in the race before then. As the polling stands, however, former President Donald Trump is well-placed to secure a second term. Prediction markets, which have no supernatural powers but usefully summarise the conventional wisdom, have Trump as the clear favourite to enter the White House a little over year from now.

A change of administration would mean a radical shift in energy policy for the US. Setting aside for now the question of the consequences for low-carbon sectors, which will be the focus of a future Energy Pulse, a second Trump administration would also have significant implications for the oil and gas industry.

A US president’s powers to affect oil and gas production one way or the other are often over-estimated. President Joe Biden said on the campaign trail in 2020: “I would transition from the oil industry… has to be replaced by renewable energy over time.” But during his administration US crude production has hit a new record high, at over 13 million barrels per day. (To be fair, the administration did shift its stance in 2022 to encourage increased production, but its rhetoric in that direction has not had any material impact, either.)

However, there are levers that a second Trump administration could pull to help the oil and gas industry and have a positive effect on production at the margin. In his campaigning, Trump has identified boosting oil and gas output as a priority. He has said in public appearances that he wanted to be “a dictator for one day” to address two issues: “for drilling and for closing the border.”

Those comments point to the use of executive actions and rule changes to lighten the regulatory burden on oil and gas companies. The Environmental Protection Agency last month announced new rules to cut emissions from oil and gas operations, including a ban on routine flaring at new wells, requirements for comprehensive monitoring for methane leaks and new standards for equipment, such as controllers, pumps and storage tanks. A Trump administration could be expected to scrap all of those provisions.

Other climate-focused policy initiatives would also come under pressure. The Securities and Exchange Commission has been working on the final versions of its new rules on climate-related disclosures, including emissions reporting, which are scheduled to be published this year. The SEC is an independent agency, but a President Trump would be able to overturn the current majority of Democratic appointees and block those rules.

On some issues, the policy pendulum has been swinging back and forth with each change of administration. The first Trump administration in 2020 reformed the regulations for environmental approvals in 2020, with the aim of expediting infrastructure projects including oil and gas pipelines and LNG plants. Some of the key changes in those reforms were reversed by the Biden administration in 2022, and last July the White House Council on Environmental Quality proposed further changes. A second Trump administration would be likely to bring back the 2020 framework.

Leasing of federal lands and waters for oil and gas development is another area that would be set to change. The America First Policy Institute, a thinktank that employs several former officials from the first Trump administration, says restrictions on leasing under President Biden represent a “war on American energy”.

The administration has slowed the pace of onshore lease sales, and imposed new restrictions on oil and gas development in Alaska, including the cancellation of issued leases. In the Gulf of Mexico, the administration has proposed the smallest possible lease sale programme that is consistent with its goals for offshore wind development under the terms of the 2022 Inflation Reduction Act.

A change of approach on regulations and leasing would certainly be welcomed by many – although not all – in the US oil and gas industry and might squeeze out a little extra production. But US Lower 48 crude and condensate production has risen by about 2 million barrels per day during the Biden administration. If federal policy has been holding back growth, it has not been very effective. Almost half of that increase has come from New Mexico, where most development is on federal lands.

US oil production growth is slowing now, but not because of anything to do with government policy. The slowdown has been driven by crude prices declining while oilfield services costs have remained resilient following strong increases in 2022-23. West Texas Intermediate crude has dropped from a peak of US$95 a barrel at the end of September to a range of US$70-US$75 a barrel over the last six weeks or so.

A more active leasing programme could potentially boost production, but only in the longer term. It would be unrealistic to expect a change of administration to make a large and rapid difference to the supply side for US oil and gas.

In fact, a future Trump administration could have a larger and more lasting impact on the demand side. For oil, Wood Mackenzie’s base case forecasts projects that US demand will peak around 2025-27, and then decline slowly as consumption is eroded by increased fuel efficiency and the rise of electric vehicles.

Trump has been vocal in his opposition to EVs, and could be expected both to scrap regulations that encourage manufacturers to make them, and to push for an end to the tax credits that support sales. He would face obstacles in that effort: many states will continue to back electrification, and manufacturers have committed to making the shift to EVs. But to the extent that he is able to slow that transition, Trump will be able to help US oil demand stay higher for longer.

On gas, similarly, a President Trump would be able to take actions to help support demand. The Biden administration, under pressure from climate campaigners, is reviewing its criteria for deciding whether a gas export project is in the national interest. The Department of Energy already tightened its rules on permit awards last year, and now looks likely to add further restrictions related to greenhouse gas emissions.

Any change in the rules would most likely not stop new LNG export plants that have already been granted permits and are under construction. But future projects that have not reached final investment decision could be affected. A Trump administration could be expected to be more supportive of developers, allowing more export projects and ultimately boosting international sales of US gas.

We could also see more regulations and incentives that support fossil fuel consumption. One possibility would be a national version of the subsidies introduced in Texas to support gas-fired power generation.

A combination of some or all of these initiatives could make a material difference to US demand for oil and gas over time. The danger for any future administration would be that pulling the levers to increase demand while failing to do much to boost supply would put upward pressure on prices, particularly for natural gas. Trump and his advisers have made it clear that climate change would be a very long way down his list of priorities, as it was in his first term. Impacts on consumers will be a more effective constraint on his energy ambitions.

In brief

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KeyFacts Energy Industry Directory: Wood Mackenzie