On Monday, Donald Trump unveiled a comprehensive plan to maximize oil and gas production in the coming years.
At the same time as the new president declared a national energy crisis, he signed a presidential order with the ambition of ensuring the nation lower energy prices and filled oil reserves – as well as full strength in exports to the rest of the world.
- We are going to be a rich nation again, and it is the liquid gold under our feet that will ensure that, Trump said Monday.
Oil analyst Teodor Sveen-Nilsen at Sparebank 1 Markets says that Trump sent signals that could pull oil prices both up and down.
- He is positive about oil and gas. All other things being equal, more oil will result in lower oil prices, Sveen-Nilsen tells Børsen.
As part of his so-called "3-3-3 plan", Trump has ambitions to increase energy production by 3 million oil equivalents per day. Sveen-Nilsen emphasizes that Trump cannot simply adopt increased oil production.
- If the American oil industry consisted of large state-owned companies, he would have had great credibility. But these are privately owned oil companies that operate with profit as their main goal. If they are to increase production, Trump may have to do something about tax levels, and that will take time. But it is profitability and the oil price that regulate this, says Sveen-Nilsen.
The US Strategic Petroleum Reserve was reduced during Joe Biden's presidency, from 650 million barrels to around 450 million barrels. Trump has said he will fill the oil reserves "to the brim" again.
- If true, it will result in a tighter market and increase the price, says Sveen-Nilsen, adding:
- But there is already too much oil in the market, and in 2025 it is not certain that it will have much impact on the market balance if the US fills up its stocks.
The third uncertainty is sanctions.
- A number of barrels may be lost. Trump has warned of maximum pressure on Iran. At the same time, the market is now used to sanctioned oil, and the value chain is used to transporting oil that is not legal. This means that the sanctions may have a weaker effect, says Sveen-Nilsen.
Norway can do little else than keep a steady course, he believes.
- Norway cannot change oil policy as a result of this. We must continue with stable framework conditions, not do as they have done in the UK, where there are constant changes in the tax system that create instability. Oil production has a horizon of several decades, which far exceeds a single presidential term.
US expert Hilmar Mjelde believes Trump's promise to fill the US strategic oil reserves "all the way to the brim" is not unexpected.
Trump has a kind of somewhat old-fashioned industrial society worldview, which he associates with an American bulldozer golden age. He likes industry, oil, coal, and big rumbling trucks and brick buildings made of sand and stone.
- It is useful to remember that the politician Trump is actually the builder and real estate developer Trump. That completely characterizes his political worldview as well, Mjelde tells Børsen.
Chief economist Kyrre M. Knudsen at Sparebank 1 SR-Bank believes Trump's announced energy policy could have significant ripple effects for the Norwegian economy.
- Trump is sending very strong signals with his plans for US energy policy. It is one of the areas where he can directly influence the economy's ability to grow. Cheap energy is good for the US economy. However, he is ignoring climate and sustainability, says the chief economist in a message to NTB.
This will dampen energy prices, which in turn means that Norway earns less from its energy exports.
- But this will extend the oil age, also in Norway, says Knudsen.
In a morning report on Tuesday, Roger Berntsen, an analyst at Nordnet, writes that there is uncertainty about how Trump's "Drill Baby Drill" statement will affect the energy sector worldwide.
- If the US intensifies oil and gas production, this could push down fossil fuel prices and weaken the competitiveness of renewable energy sources, explains Berntsen.
He points to several potential pitfalls.
- Increasing oil and gas production is inherently difficult because increased supply pushes down prices, which reduces profitability and weakens the incentives for private companies to invest, he writes and continues:
- In order to possibly motivate producers, stronger global economic growth is required, which can increase energy demand and compensate for the price pressure. This requires stable geopolitical developments, predictable framework conditions and political signals that provide confidence that short-term price declines are part of a long-term plan for energy security and economic growth.
Source: Dagbladet.no
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