IEEJ：November 2020

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Special Bulletin
A Japanese Perspective on the International Energy Landscape (508)

November 25, 2020

Importance of U.S. in Global Energy Situation under the Next Administration (3)Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
In the third report on energy and environment policies of the next U.S. administration, I
would like to discuss relations between the incoming administration and shale resources
development.
One of the keywords for policies and initiatives that President Donald Trump has
implemented in the past four years is “America First.” His major policies have frequently beencharacterized as anti-Obama. Regarding energy, he has strongly supported the shale revolution thathas played a key role in backing up U.S. economic prosperity and contributed to increasing US
national power. Appreciating growing oil and natural gas production as creating positive effects for
the United States, Trump has kept a basic attitude of promoting oil and natural gas production andexports. He has given priority to the so-called “energy dominance” policy that exploits the shale
revolution achievements as the source of U.S. national power and the cornerstone of foreign,external energy, and international energy security policies.
In an extremely interesting case to represent that policy, President Trump attempted tomediate between Russia and Saudi Arabia to revive joint oil production cuts by the Saudi-led
Organization of the Petroleum Exporting Countries and non-OPEC oil producers led by Russia,
when crude oil prices crashed amid an oil price war between the two countries and the COVID-19
pandemic after the OPEC-plus joint production cut framework broke up on Russia’s refusal toenhance a production cut in March. In fact, the attempt led the OPEC-plus group to revive the joint
production cut framework in April and start its largest ever production cuts from May. Earlier, theUnited States had traditionally regarded OPEC and other organizations for production adjustments as“cartels” and officially refused to accept their presence or actions. In real politics, the United States
had been positioned to discuss international oil market problems with OPEC or its leader Saudi
Arabia through various approaches and channels. Officially, however, the United States had neverapproved any production adjustments. However, President Trump backed up the revival of theOPEC-plus production adjustment in his unique way of doing things. This may be because Trump
was concerned that the oil price crash would reduce shale revolution achievements and seriously
affect the “energy dominance” policy.
What attitude would President-elect Joe Biden take on the shale revolution? This is aquestion that exerts great influence on the U.S. energy market, the U.S. economy, and the global
energy market. The reason this question attracts interest is that Senator Bernie Sanders and otherleftists or environmentalists during the Democratic Party’s process for nominating its presidential
candidate called for banning or restricting hydraulic fracturing (fracking) technology for the shalerevolution or even oil or gas drilling itself from the viewpoint of environmental protection. As iswell known, fracking technology has been a key technology to support shale oil and gas production.
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Eventually, centrist Biden became the party’s presidential candidate and declared hisvictory in the presidential election. During presidential election campaigns, Biden attempted toadjust or unify opinions on various policies to achieve the party’s unity and conciliation. He then had
no choice but to indicate some consideration to the environmental impacts of fracking and oil andgas drilling. This is the reason Trump tried to brand Biden as a presidential candidate hurting the oil
industry in his direct debates with Biden in the final days of the election campaigns.
In response, Biden said he would ban fracking and drilling on federal lands inconsideration of environmental impacts. Seemingly, Biden has taken a tough attitude against
fracking or drilling. Given that federal lands are not so important for shale development, however, aban or restriction on fracking or drilling on federal lands would have only limited impacts, according
to many experts. The Biden remark could be taken as indicating that he is trying to balance his
stance of considering environmental conservation as urged by environmentalist Democrats with his
realistic choice to keep from imposing effective restrictions on shale oil and gas production.
As history shows, however, Biden faced the shale revolution as vice president in theBarack Obama administration. During his first presidential election campaigns, Obama had given
priority to the so-called Green New Deal policy that would focus on renewable energy development
to recover the U.S. economy and employment from the 2008 global financial crisis.
Eventually, however, the U.S. economic recovery and growth under the Obamaadministration were supported by unprecedentedly rapid expansion in oil and gas production, which
contributed to increasing high-income jobs not only in the oil and gas industry but also ininfrastructure and other relevant industries and raising U.S. industrial and manufacturing
competitiveness through lower gas and energy prices. Growing oil and gas exports had
macroeconomic effects including trade balance improvements. In fact, the Obama administration
conducted a cost-benefit analysis on a plan to export liquefied natural gas (LNG) and concluded that
LNG exports would have positive effects on the U.S. economy and serve U.S. national interests.
Biden who has experience with the Obama administration is now required to recover theU.S. economy from the COVID-19 disaster that is more serious than the global financial crisis. Then,it may be difficult for him to have any essentially negative attitude on the shale revolution that hascontinued to lay golden eggs for the U.S. economy. Like the Obama administration, the Bidenadministration may place hopes on renewable energy-related industries and innovative climatechange countermeasures for the economic recovery. Biden’s policy of seeking carbon neutral status
in 2050 leads hopes to be placed on these industries. Nevertheless, he may not make light of
shale-related industries that have contributed to U.S. economic growth and created high-incomejobs.
Within the Democratic Party set to control the White House, however, there may bevarious tugs-of-war between environmentalists, centrists, and conservatives in the Party politics. The
tug-of-war process may produce various policy adjustments and compromises, which could berelated to energy or shale resources development. Attracting attention in this respect will be Biden’s
nomination of officials to head the Department of Energy and the Environmental Protection Agency
and take charge of international energy policies at the State Department. The nomination may
indicate the incoming Biden administration’s energy policy and attitude on shale resources
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development. I would like to closely watch relevant developments.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

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