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Crude Economics
The First Impact of the Climate Deal Withdrawal

The real, measurable impacts of Trump’s decision to pull out of the Paris climate agreement are going to be few and far between, but the first one we’ve seen thus far has been a drop in the price of oil. This won’t hurt Trump with his voters: market participants think that the U.S. will now pump more oil, leading to long term lower oil prices. Reuters reports:

Crude fell more than 1 percent on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump’s decision to withdraw from an international climate accord will spur further domestic production and contribute to a persistent global oversupply. […]

“Trump seems to be removing any barriers he can find that would obstruct growth of crude oil or natural gas,” said Stewart Glickman, energy equity analyst at CFRA in New York.

Let’s not give the White House too much credit here, though. The Obama administration, for all of its gesturing towards renewables, was remarkably friendly towards the shale industry. The recent growth we’ve seen in American production is the result of innovation and falling costs in shale drilling, rather than the rolling back of regulations.

But perceptions matter to markets, and Trump’s announcement yesterday has further strengthened analysts’ belief that this Administration will do everything it can to help out America’s oil and gas industry (even though the natural gas boom is responsible for knocking Old King Coal off his throne in the U.S.).

Russia is paying close attention to U.S. oil production these days, and the CEO of the state-owned oil company Rosneft, Igor Sechin, publicly expressed concerns that surging American supplies could overcome petrostate efforts to cut production and push prices back up. We certainly saw evidence of that in trading today.

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  • CaliforniaStark

    For the liberals who claim China is an example of sustainable green policies, here is a comparison of CO2 emissions of the U.S. and China.

    https://twitter.com/FoxNews/status/870734757189046272/photo/1

    • Beauceron

      And just remember, as Germany plays the role of savior of the planet, that their Co2 emissions have been going up, not down.

      “Germany emitted more greenhouse gasses in 2016 than in the previous year.

      The EU’s largest member state emitted the equivalent of 906 million tonnes of CO2 last year, compared to 902 million in 2015, the German Environment Agency reported on Monday”

      https://euobserver.com/environment/137298

      • Tom

        Well yes, but that doesn’t matter, because Germany got rid of its nuclear power, which is evilbadnasty.

        • Andrew Allison

          Getting rid of nuclear power is not just evilbadnasty, but utterly stupid. Meanwhile, it bears repeating that the USA is the only country which is seriously reducing emissions, which are now at 25-year lows.

          • FriendlyGoat

            That was the credible rationale by which we might have led the herd of cats—–until the new head cat-herder decided scatter them all again by barking. Woof, woof.

          • Tom

            You and I are in full agreement. The fact that nuclear’s the one of the lowest carbon-emission sources of energy on the planet and yet the AGW crowd still opposes it is one of the main reasons I think their actual goal is not to protect the environment.

  • rheddles

    The Obama administration was remarkably friendly towards the shale industry.

    Because they didn’t raid the wells like they were Gibson Guitar? With friends like that, who needs enemies?

    • D4x

      Really! So friendly every neoDem fervently believes fracking contaminates groundwater, and will kill the cows, because of the 2012 film, “Promised Land”. 2012 was before they realized that cows are worse, because methane.

    • D4x
      • Proud Skeptic

        Yesterday I was driving through rural eastern Connecticut and one house had a sign in the front yard….”Ban Fracking Waste”.
        There is no oil, let alone fracking in eastern Connecticut. Some people just like to make a statement.

        • LarryD

          Virtue-signaling.

      • Andrew Allison

        But where, oh where, is the Don’t Be So Fracking Stupid sign?

        • D4x

          This cohort lacks humor.

        • rheddles

          I’ve seen many in farms sitting on top of untapped natural gas. The anti-fracking signs are mostly in the towns and suburbs.

      • Jim__L

        Nice drop shadows on those signs. The source is probably not a trustworthy website.

        • D4x

          edited url.

          admit to online paranoia…got hacked yesterday. no damage unless it was MS staging a fake hack…

          • Jim__L

            Eh, it was probably just advertising taking liberties. I guess my own online paranoia is showing too.

    • CaliforniaStark

      The Obama administration was never friendly to fracking. They ignored it initially because they believe the “peak oil” theory, that oil and gas resources would quickly be depleted. The Guardian as late as 2013 had a quote from a former BP geologist still pushing the peak oil theory:

      “Although he is dismissive of shale oil and gas’ capacity to prevent a peak and subsequent long decline in global oil production, Miller recognises that there is still some leeway that could bring significant, if temporary dividends for US economic growth – though only as “a relatively short-lived phenomenon”:

      ” We’re like a cage of lab rats that have eaten all the cornflakes and discovered that you can eat the cardboard packets too. Yes, we can, but… Tight oil may reach 5 or even 6 million b/d in the US, which will hugely help the US economy, along with shale gas. Shale resources, though, are inappropriate for more densely populated countries like the UK, because the industrialisation of the countryside affects far more people (with far less access to alternative natural space), and the economic benefits are spread more thinly across more people. Tight oil production in the US is likely to peak before 2020. There absolutely will not be enough tight oil production to replace the US’ current 9 million b/d of imports.’ ”

      Obama thought the billions he poured into renewable technologies would result in wind and solar rapidly replacing fossil fuels. Many of the companies he funded, like Solyndra, went bankrupt. As it became clear the peak oil theory was bogus, Obama became hostile to the shale industry and began issuing a multitude of administrative orders in an attempt to restrict oil and natural gas production. He particularly began to target the natural gas industry with unnecessary and often inane methane regulations. .

      • Jim__L

        I’m trying to figure out (via Google) how many barrels per day we actually import at this point. One source says in 2015 we consumed about 20 million b/d while producing 9 million b/d, although another source said in 2014 we only imported 24%, a record 47-year low, while still another source said in 2014 we produced 9 million b/d. (Implying we only used a total of 12 million that year?)

        If anyone could point me towards real numbers here that actually added up, it would be much appreciated.

        • texasjimbo

          You may have already looked at it, but the EIA is probably the best source for that type of information. Use the search feature in the upper right of the home page.
          https://www.eia.gov/

    • Boritz

      Nov 17, 2016 – House Republicans raised the alarm Thursday over an 11th-hour ploy by the Obama administration to cancel oil and gas leases and shut down fracking on federal lands. –Washington Examiner

      Doesn’t sound “remarkably friendly” does it?

  • D4x

    Traders were also reacting to SecInt Zinke in Alaska for a week, timed with POTUS’ Paris announcement, from May 31: “…The only path for energy dominance is a path through the great state of Alaska,” Zinke told the audience at an Anchorage conference hosted by the state’s major oil industry group, the Alaska Oil and Gas Association. “The president has declared — and thank you Donald J. Trump — that the war on North American energy is now over,” Zinke added, equating “energy” and oil. …”
    https://www.adn.com/politics/2017/05/31/new-interior-secretary-pledges-fewer-roadblocks-for-alaska-oil-development/

    Also under-reported was China’s Xi refueling in Alaska on his return from Mar-a-Lago. Alaska was well prepared with a preview for LNG gas exports.

  • Unelected Leader

    The piece of garbage known as the Paris accord looks like it was written by the same MNCs who’ve been outsourcing US labor for decades. Total garbage.

    The biggest polluter doesn’t have to do anything until 2030. Rrriiigghhhtt. And that place happens to be what’s known as a “pollution haven” for MNCs – china.

  • Andrew Allison

    Let me see if I have this right: the price of oil declined for the second straight week because President Trump announced yesterday that we were leaving the Paris con job? GMAB! The price of oil is going back to where it was before the meaningless extension of the OPEC & Friends production cut-back. Similarly, the trajectory of US production has been in place for a while. Meanwhile, the administration has woken up to the fact that we no longer need a strategic oil reserve and announced plans to sell some of it. The suggestion that oil is declining because Trump exited the Paris agreement is simply fatuous.

  • Kevin

    “Trump seems to be removing any barriers he can find that would obstruct growth of crude oil or natural gas”
    Good!

  • Kevin

    “The Obama administration, for all of its gesturing towards renewables, was remarkably friendly towards the shale industry.”

    It tolerated it in some locations for the time being. It made no effort to stop ridiculous restrictions in NY, etc. Fracking was not allowed to expand on Federal land. He supported Hillary s platform to crush it everywhere after the 2016 election.

  • Jacksonian_Libertarian

    “Let’s not give the White House too much credit here, though. The Obama administration, for all of its gesturing towards renewables, was remarkably friendly towards the shale industry.”

    NO he wasn’t! He put all Federal Lands off limits to development. He did everything he could to stand in the way of development, preventing pipelines, installing bogus EPA regulations, demanding studies of Fracking pollution and earthquakes. He also was a major part of the “War on Coal” and “Anti-nuclear”. Obama is the Worst President in History, that will be all that’s left soon of his Legacy.

  • SDN

    “The Obama administration, for all of its gesturing towards renewables, was remarkably friendly towards the shale industry. ”

    That would be because the shale industry was operating on private rather than public land, and he couldn’t stop it without a long and nasty takings process.

  • Dave Hunter

    Andrew Cuomo is costing the citizens of the State of NY millions of dollars in lost fracking revenue. So it will be perfectly logical for the Demorats to nominate him for President, right?

  • Rick Caird

    The Paris Agreement was an effort to get something everybody could sign onto, but not to commit to. The fact Trump refused to embrace the Obama – World agreement, simply brings to the fore the idea the agreement is a nothingburger.

  • Proud Skeptic

    Go Forth Bigly

  • lightray9a

    Who the hell wrote this article? Obama wasn’t friendly to the shale industry! He blocked every attempt at exploration on public lands. The only reason the shale boom occurred is because it happened on private land, and Obama couldn’t do anything to stop it. Geez… pay attention!

  • BostonLiberty

    Obama was not ‘remarkably friendly towards the shale industry’. He did everything he could to regulate the fossil fuel industry out of existence. Not to mention the farce that is the ‘Peak Oil’ theory. Thank God for President Trump, as we now have the right person in the White House to undo all of the damage done by Obama and the Democrat Socialists.

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