Bleak images of Washington flooded with troops to prevent further violence as president-elect Joe Biden prepares to take office obscure an equally grim reality for US oil executives. The Democrats will control both the White House and Congress after 20 January, for the first time in 10 years, as they set an ambitious course to decarbonise the US economy.
The oil industry's embrace of soon-to-be-former president Donald Trump's energy agenda of deregulation and ignoring climate change has proved to be as productive as a shale well, with an initial burst of gains and a subsequent exponential decline. The regulatory rollback may have saved producers cents on the barrel, but it has painted the whole industry as insensitive to environmental concerns, regardless of where individual companies stand on the issue.
Similarly, doubling down on the fossil fuel agenda and tying itself too closely to one party has cost the sector political capital. Trump's chaotic presidency and its violent end in a second impeachment leave the Republicans in disarray. Many oil producers' champions in Congress, including Texas senator Ted Cruz and Louisiana senator John Kennedy, are tarnished by their association with Trump's attempts to overturn the election results that culminated in the assault on the Capitol building by his supporters. All this has made the party's pathway to recapturing Congress in 2022 and the White House in 2024 more difficult, especially as major corporate backers are putting donations on hold after this month's violence.
Oil industry leaders, who never entirely bought into Trump's "America First" agenda, were appalled by the events at the Capitol. But a decision by many oil companies — including BP and Chevron — for a six-month pause on all political contributions, rather than halting giving just to those who tried to overturn the election result, suggests that donations will resume as soon as the public's attention shifts elsewhere. Leading industry group the American Petroleum Institute says that preserving pipeline projects, tax breaks and access to federal land remain its top priorities, as if the era of preferential policies could outlive Trump's presidency. Biden has promised to expand renewable energy, block new oil development on federal land and reinstate climate-focused regulations.
Taking responsibility
But the end of the disorderly conduct that has been the hallmark of the Trump administration will come as a palpable relief to some. "We are looking forward to a more responsible administration in Washington," one executive told the Federal Reserve Bank of Dallas' oil industry survey last month. Biden's plans to contain Covid-19 and revive the economy with a fresh $1.9 trillion stimulus package would address the most pressing problem facing US producers — an unprecedented demand slump from pandemic-related constraints on business activity and travel.
Longer term, the industry needs to adapt its views and messaging. Betting the business on an eventual return of a Republican administration would ignore the erosion in the sector's competitiveness after the 2020 price collapse. Its biggest enemy in the next decade is not a Democratic president advancing the energy transition, but the shift in investor perceptions of risks associated with fossil fuels. Taking more responsibility for its role in climate change will be its best defence.
