The Outlook for
Energy Under a
Trump Administration
Major Volatility Ahead
David L. Goldwyn
The Outlook for
Energy Under a
Trump Administration
Major Volatility Ahead
David L. Goldwyn
ISBN: 978-1-61977-446-9
Cover photo
:
Vehicles from the USS Denver take part in an amphibious exercise in the South China Sea in
February 2011. Photo credit: US Department of Defense/Wikimedia
Map vector on page 6 courtesy of Freepik.
This report is written and published in accordance with the Atlantic Council Policy on Intellectual
Independence. The author is solely responsible for its analysis and recommendations. The Atlantic Council
and its donors do not determine, nor do they necessarily endorse or advocate for, any of this report’s
conclusions.
January 2017
The Outlook for Energy Under a Trump Administration: Major Volatility Ahead
1ATLANTIC COUNCIL
Donald Trump at a rally in Laconia, New Hampshire in July 2015.
Photo credit:
Michael Vadon/Wikimedia
SUMMARY
Oil, gas, and renewable energy markets will face high levels of uncertainty and potentially extreme volatility under
a Trump administration in 2017. Some of these uncertainties fow from questions about the new administration’s
yet-undefned policies on energy production, trade, and climate policy. Others fow from the basket of national
security risks that a new US President was destined to inherit. Yet it is Mr. Trump’s signaling of major shifts in US
foreign policy priorities that may have the greatest near-term impact on energy supply and demand. The impact
of these uncertainties, following two years of reduced oil and gas investment and low energy prices, may inhibit
investment and sow the seeds of a potential oil and gas price shock by 2020, if not sooner.
The Outlook for Energy Under a Trump Administration: Major Volatility Ahead
2ATLANTIC COUNCIL
Domestic energy policy
It is too early to tell with certainty what President
Trump’s energy policies will be. Campaign statements
suggest a broad retreat from regulations seeking
to reduce greenhouse gas (GHG) emissions (and
thereby costs) in the energy sector.1 These changes
include undermining the Clean Power Plan, revoking
GHG testing for new infrastructure permits, avoiding
new regulation of methane from existing sources of
emissions, and potentially withdrawing from the Paris
Agreement and regional agreements to reduce GHG.2
Revision of existing regulations is a stated goal, but
a slow process subject to legal challenge. Congress
can reverse regulations that are less than a year old
through the Congressional Review Act (CRA). Industry
groups and their congressional supporters are seeking
an “omnibus” CRA to reverse several regulations at
once.3
In addition, Trump aims to increase US energy supply:
he has pledged to open federal lands for coal leasing
and expand oil and gas leasing.4 Questions remain
about a Trump administration’s decision on new fuel
1 “An America First Energy Plan,” The Ofcial Website of Donald
J. Trump for President, last modifed May 26, 2016, https://
donaldjtrump/press-releases/an-america-frst-energy-plan.
2 BBC News Staf, “Donald Trump would ‘cancel’ Paris climate
deal,”
BBC News
, May 27, 2016, bbc/news/
election-us-2016-36401174; “An America First Energy Plan,” ibid.
3 Lydia Wheeler, “House passes bill targeting ‘midnight’
Obama regs,”
The Hill
, November 17, 2016, http://thehill/
regulation/306564-house-passes-bill-targeting-midnight-
obama-regs. The Congressional Review Act is used rarely and
usually on a case-by-case basis with individual regulations. As
the source notes, congressional Republicans seek a single-vote
rescinding of all Obama midnight regulations. Targeted rules
include the Bureau of Land Management Venting and Flaring
Rule, the Five-Year Plan for Ofshore Oil and Gas Drilling, and
the Department of the Interior’s Blowout Prevention and Well
Control.
4 “Trump Outlines Plan for American Energy Renaissance,” The
Ofcial Website of Donald J. Trump for President, September
22, 2016, https://donaldjtrump/press-releases/trump-
outlines-plan-for-american-energy-renaissance.
efciency standards. A more permissive policy on
pipeline permitting, both for Keystone XL and other
US-Canada pipelines, is also high on the Trump
transition agenda.5
Trade policy
President elect Trump’s pledge to impose 45 percent
tarifs on China, 35 percent tarifs on certain goods
and American companies exporting from Mexico,
revise NAFTA,disfavor regional trade agreements,6
and potentially withdraw from the US-Korea Free
Trade Agreement7 (and even the WTO)8 all suggest a
period of high uncertainty in the future of global trade
agreements.
Mr. Trump’s transition team has called new tarifs
and treaty withdrawal “last resorts”9 but Mr. Trump
reiterates the threat in spite of legal concerns and
resistance within his own party.10 At the broadest
5 On Trump’s possible moves on Keystone XL, see: Jennifer A
Dlouhy, “Trump Aides Eye Reviving Keystone by Rescinding
LBJ’s Order,”
Bloomberg Markets
, November 23, 2016, https://
bloomberg/news/articles/2016-11-23/trump-aides-
eye-reviving-keystone-by-rescinding-lbj-s-order. On the Dakota
Access Pipeline, see: Kris Maher and Will Connors, “Trump Team
Pledges Support for Completing Blocked Dakota Pipeline,”
The
Wall Street Journal
, December 5, 2016, wsj/
articles/trump-team-pledges-support-for-blocked-dakota-
pipeline-1480960849.
6 “Trade Reform,” Ofcial Website of President Elect Donald J.
Trump, https://greatagain.gov/policy/trade-reform.html.
7 “Trump blasts FTA with Korea as destroyer of jobs in US auto
industry,”
The Korea Times
, October 30, 2016,
koreatimes.co.kr/www/news/nation/2016/10/120_217074.html.
8 Geof Dyer, “Donald Trump threatens to pull US out of WTO,”
Financial Times
, July 24, 2016, https://ft/content/
d97b97ba-51d8-11e6-9664-e0bdc13c3bef.
9 Ylan Q. Mui and Jim Tankersley, “Trump’s new Treasury,
Commerce nominees say no ‘absolute’ tax cut for the wealthy,
predict faster economic growth,”
The Washington Post
,
November 30, 2016, https://washingtonpost/news/
wonk/wp/2016/11/30/trumps-new-treasury-commerce-
nominees-say-no-absolute-tax-cut-for-the-wealthy-predict-
10 Sahil Kapur, “Trump’s ‘retribution’ tax stirs legal questions, GOP
resistance,” December 5, 2016,
The Chicago Tribune
, http://
NEW PRESIDENT, DRAMATICALLY
NEW ENERGY POLICIES
The Outlook for Energy Under a Trump Administration: Major Volatility Ahead
3ATLANTIC COUNCIL
level, such policies could destroy global demand by
disrupting value chains, driving the United States
into recession, and inviting a full trade war or at least
selective retaliation.11 Similarly, some congressional
Republicans have proposed a Border Adjustment
Tax (BAT) instead of a tarif system, which would
tax imports while making exports tax-free. A BAT
would have major implications for US businesses
and the energy industries. Pure upstream producers
and LNG exporters would beneft while US refneries
using imported crude would be greatly and adversely
afected. A BAT would almost certainly result in
substantial increases in the price of consumer goods
and the price of gasoline.
Energy markets could be afected in multiple ways.
US liquefed natural gas (LNG) exports could be
harmed. Currently, LNG exports to countries ofering
chicagotribune/business/ct-trump-retribution-tax-
20161205-story.html.
11 Marcus Noland, Gary Clyde Hufbauer, Sherman Robinson, and
Tyler Moran, “Assessing Trade Agendas in the US Presidential
Campaign,” The Peterson Institu