Donald Trump’s first speech as the 47th President of the United States featured various slogans that he employed during his presidential campaign, and among them was “Drill, baby, drill”, indicating that his administration will push for more oil and gas production as well as consumption in the US. Trump, who said that he will be declaring a “national energy emergency” to boost US oil and gas production and bring prices down, also announced that the US will increase its energy exports.
The US President’s comments right after his inauguration could lead to further downward pressure on oil prices. In fact, oil prices did slip a bit after Trump’s inauguration speech, even as the market awaits the details of his executive orders on the “energy emergency”.
For India, which is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement of the commodity, a fall in oil prices would be a good thing. Also, the US is already the fifth-largest supplier of crude oil to India, and a boost in US oil exports could further benefit India.
Heavy dependence on imported crude oil makes the Indian economy vulnerable to global oil price volatility, apart from having a bearing on the country’s trade deficit, foreign exchange reserves, rupee’s exchange rate, and inflation.
“The inflation crisis (in the US) was caused by massive overspending and escalating energy prices, and that is why today I will also declare a national energy emergency. We will drill, baby, drill. America will be a manufacturing nation once again, and we have something that no other manufacturing nation will ever have, the largest amount of oil and gas of any country on earth. And we are going to use it,” Trump said.
“We will bring prices down, fill our strategic (petroleum) reserves up again, right to the top, and export American energy all over the world. We will be a rich nation again, and it is that liquid gold under our feet that will help to do it,” Trump said, adding that he will also revoke what he terms as the “electric vehicle mandate”, or the Joe Biden administration’s policies that pushed for higher electric vehicle adoption.
While it is too early to say how Trump’s second term as US president will actually turn out to be for global oil markets, industry watchers expect the Trump administration’s economic and energy policies to put downward pressure on oil prices. If strictly implemented, his plans to impose high tariffs on imports–particularly on those from China–could negatively impact global oil demand as China is the world’s top oil importer.
Moreover, Trump’s push to significantly increase US oil production and even exports could add to the global oil supply and even push major oil producers to compete for market share , which again could put downward pressure on prices.
Realistically though, the incoming dispensation in Washington is likely to push for a largely balanced global oil market to keep oil prices in check while avoiding a steep decline or crash, as that would make production unviable for American oil producers as well. And although Trump has been promising voters that he will drastically cut energy bills in the US, the White House on its own has limited instruments to meaningfully sway oil prices.
In a note in November, S&P Global Commodity Insights (SPGCI) has said that it expected Asian oil buyers—including India—to witness significantly more opportunities to import “attractively priced crude from the US” as its competition with the OPEC (Organization of the Petroleum Exporting Countries) suppliers intensifies.
Growing US crude production has posed a significant challenge for OPEC+ (OPEC and its other partner countries) in recent years, exerting downward pressure on prices, threatening the bloc’s market share and prompting massive output cuts. Analysts say increased US production, as well as output increases in other non-OPEC+ countries, such as Brazil, Guyana and Canada, have nearly nullified the impact of OPEC+ production cuts in 2024, SPGCI said.
Commodity market analytics firm Kpler believes that Trump will forcefully support domestic oil and gas producers in the US, pursue a policy of aggressive energy infrastructure buildout, and could attempt to moderate emissions standards.
“Despite our expectations for a sharp decline in US oil production growth next year, Trump will still push for policies supportive of oil and natural gas drilling, even if these measures are only marginally impactful. During the campaign, Trump has reiterated plans to expedite permit issuance for drilling on federal lands and an intent to roll back regulations that prevent oil and gas extraction operations. Trump will likely look to revoke Biden era executive orders as well, including aggressive greenhouse gas emission reduction targets, and a plan to conserve 30% of US federal lands by 2030,” Kpler had earlier said.
