US president Donald Trump declares he has achieved what his predecessors could only imagine — not just American energy independence but energy dominance. “We sparked a revolution in domestic energy production, and the US is now the No. 1 producer of oil and natural gas anywhere on planet Earth,” Trump says.
But Trump’s ambitions are being thwarted by a US economy gob smacked by the Covid-19 pandemic, and by his administration’s own fumbling efforts at deregulation.
Certainly, Trump has reason to boast. The US emerged as a net exporter of crude and petroleum products in September 2019 for the first time in generations, US Energy Information Administration (EIA) data show. In November, US crude production reached a record 12.87mn b/d. And for all of 2019, domestic production of all energy types — from coal to solar — outpaced US consumption.
But by May, the US was again a net importer of crude and products. And the US has not shaken its reliance on crude imports, although the crude trade gap narrowed to 2.4mn b/d in April as Opec shipments to the US fell to their lowest since the EIA began keeping records. But then Saudi crude arrivals surged in May and June.
The oil price shock and standoff between Opec+ producers sent tremors through a debt-burdened US shale sector. The Federal Reserve Bank of Dallas warns producers could face a prolonged downturn, while consultancy Deloitte says shale producer write-downs could top $300bn.
US crude production dipped below 11mn b/d in June, the EIA estimated in its latest Short-Term Energy Outlook released on 7 July. And despite Trump’s full-throated support of the coal industry, US coal output is expected to drop this year to its lowest since 1963.
Trump came into office promising to brush aside federal regulations he deemed were holding back domestic production of oil, natural gas and coal. But his strategy has been plagued by poor execution.
Consider the 570,000 b/d Dakota Access crude pipeline (DAPL). Within days of entering the Oval Office, Trump directed the US Army Corps of Engineers to expedite approval of the pipeline, despite objections from the Standing Rock Sioux tribe and other Native American groups.
For more than three years, DAPL has served as a major conduit of crude from the Bakken shale in North Dakota to the US midcontinent and the US Gulf coast. But on 6 July, US district court judge James Boasberg threw out a federal easement enabling DAPL to cross under the Missouri river, citing the “seriousness” of errors underlying the project’s permit. Boasberg gave pipeline majority owner and operator Energy Transfer 30 days to shut down and drain the pipeline. Energy Transfer is now appealing that decision.
The US Environmental Protection Agency under Trump tried to halt enforcement of methane rules for new oil and gas facilities promulgated under former president Barack Obama, only to have the courts reinstate them. The agency is expected to finalize a repeal of those rules sometime this month.
The Interior Department’s 2018 proposal to open more than 95pc of federal waters to oil and gas leasing as part of new, five-year offshore leasing plan is on hold indefinitely, largely because of ideological overreach. Coastal governors, including in the crucial swing state of Florida, have pushed back, when offshore producers would have been thrilled to have access to a portion of the eastern US Gulf and some acreage in the Atlantic off southeast states.
Many in the energy sector dismiss the notion of US energy independence as irrelevant, if not wrongheaded, in a global, interconnected oil market. When asked in an informal Argus Twitter poll whether Trump has succeeded in strengthening US energy independence, a plurality – 47pc – dismissed the idea as a myth. Another 36pc noted that US shale producers needed an agreement among Opec+ producers to help keep them afloat, while 17pc credited Trump for boosting US exports.
No matter what the claims about energy “independence”, the US will never be an energy island. And no presidential mandate to alter the US’ energy trajectory will succeed without adequate attention to the details of governing.
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