A growing Republican lead heading into this week's US midterm elections gives the oil sector hope for fewer threats from a Democratic-controlled Congress and for possible progress on bipartisan issues such as expedited infrastructure permitting.
A four-decade high in inflation and low support for President Joe Biden's handling of the economy have added to headwinds for Democrats in the 8 November midterms, where the incumbent party typically starts at a disadvantage. Republicans have built the largest lead in the US House of Representatives — and the US Senate is a toss-up — in part by tapping voter frustration about rising prices and a 3pc loss in real earnings in the year ending in September.
The House's top Republican, Kevin McCarthy, says he would seek accountability over the Biden administration's energy policies, and look to increase US oil and gas production. "We should make energy in America… and not be dependent on the Middle East," he says. Republicans want to cut permitting time by half to help lower energy costs, under a plan House Republicans released this year.
An immediate effect of Republicans taking control of the House would be the start of investigations into Biden's energy policies and spending, which are likely to mirror past probes into a failed 2009 loan to solar company Solyndra. Republicans are already starting to seek documents on Biden's record release of 180mn bl of crude from strategic reserves, and they would be able to call cabinet officials to testify as part of oversight work. "All those things really can disrupt and slow down an administration," lobbying firm CGCN president Michael Catanzaro said last month at Energy Dialogues' North American Gas Forum..
But if Republicans intend to set policy, they still have to draft bills that Biden will sign. That type of energy deal-making has in the past eluded Republicans seeking to draw a contrast to Democratic policies. "Off the bat, you're going see a pretty aggressive Republican agenda that is not thinking about making bipartisan deals," trade group American Exploration and Production Council chief executive Anne Bradbury says. Bipartisan deals to speed permitting for conventional and renewable energy projects could come later, she says.
Republican gains in Congress would mean legislative threats "dissipating a little bit" for the oil and gas industry, Bradbury says. Democrats in the past two years approved new fees on petroleum and methane emissions that should raise an estimated $18bn over the next decade. Industry officials hope for a return of bipartisan deal-making that occurred in 2015, when Congress lifted a decades-old ban on crude exports in exchange for renewable energy subsidies.
But Republican priorities appear partisan, as they consider using an approaching limit on US debt levels next year as leverage to repeal the recently passed Inflation Reduction Act and its $369bn in climate-related spending. Biden rebukes this plan and says it is "irresponsible" to consider triggering a default. "Nothing will create more chaos and more damage to the American economy than this," he says.
Who's the governor?
Democrats are also on the defensive in governors races in energy-producing states. The largest upset potential is in New York and Oregon, which Democrats have controlled since 2007 and 1987, respectively, but where polls remain tight. New York over the past decade has emerged as a major obstacle to building natural gas pipelines across the northeast US. Oregon also helped block a proposed LNG export terminal in 2020. In Pennsylvania, Democrat Josh Shapiro is polling well ahead of Republican Doug Mastriano, who is seeking less regulation of hydraulic fracturing and the removal of a ban on drilling in state parks and forests. In Texas, the largest oil-producing state, Republican governor Greg Abbott holds a similar advantage against Democrat Beto O'Rourke.
