It's a tale as old as time: there's a new sheriff in town, and the first item on the agenda is wiping out or otherwise undermining the policies of the old regime. It should come as no shock to anyone that President-elect Joe Biden is treading the same worn path as so many before him. And whereas incumbent President Trump was loyal to shale arguably to a fault, Biden has made lofty campaign trail promises to target "aggressive emissions reductions" that have shale executives nervous, to say the least. While many will be tempted to pin the "death of shale" on Biden, however, the death march started long before his presidential candidacy. The United States' once-mighty shale sector has been struggling and diminishing for years, and the novel coronavirus very well may have already delivered its coup de grace. Thanks to bottomed-out oil demand in the early days of the DOVID-19 pandemic, in what some are now referring to as "Black April," United States oil markets hit rock bottom: the West Texas Intermediate crude benchmark shocked the world when it ended April 20th at nearly $40 below zero per barrel.
The shale revolution has long since faded away and so too has much of the geopolitical power that came with it. That being said, the United States is still the biggest oil and gas producer in the world--and even if we are currently experiencing peak oil as many experts contend, the world still largely runs on oil, and fossil fuels will continue to be a major market sector and source of economic gains employment, even as that sector contracts. This is why many industry leaders are worried if not outright outraged by Biden's promises to be a world leader in reducing carbon emissions and meeting the standards set by the Paris climate agreement; they contend that a transition that is too much too quickly could threaten national security by reducing the nation's energy security and independence.
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It's been a hell of a tough year for shale, and it's understandable that the industry is not taking too kindly to a loss of support at the exact moment that they need a bailout. But shale oil and gas is just one part of a wider energy landscape that is undergoing a serious transition away from fossil fuels, regardless of who is president. Sure, shale has historically employed a million workers in the U.S. alone, but a huge number of those jobs has already dried up and blown away like so many tumbleweeds rolling across West Texas.
It's past high time that shale executives diversify and jump on the ESG (Environmental, Social, and Corporate Governance) investing trend before they get left behind.
Yes it's scary, and yes it's far from a zero-risk move for the new presidential administration to move away from the industry that has catapulted the nation to the top of the energy production food chain, but there are huge swaths of data to support that clean energy is a safer bet for future investment and future jobs. And then there's the fact that climate change is going to be very, very expensive: A 2018 report by scientists within the Trump administration found that global will cost the United States hundreds of billions of dollars each and every year, not to mention the massive impact on human and ecological health.
Fears within the ranks of the shale industry are well-founded. It's not a conspiracy theory that Biden will not be a great ally to them. But it would be ill-informed to raise the alarm bells for the economy or the energy sector as a whole. In fact, financially, it's a good move. And then there's a fact that there is an entire (severely bipartisan) congress at the helm of this country, not just one divisive figure. Even so, fighting against the global transition toward green energy and ESG is as stubborn as it is futile. An energy renaissance in Texas likely won't be fuelled by fracking (which Biden is not planning on banning, for the record), if it comes to pass it will probably be thanks to energy innovations like green hydrogen and ammonia storage and large-scale solar farms.
By Haley Zaremba for Oilprice.com
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Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the… More
Comments
Are we all forgetting who was the VP when the first shale boom happened?
Trump was friendly to us on environmental enforcement, and I admit I personally benefitted from his presidency, but all this doom & gloom about Biden's presidency is irrational clickbait.
The man is an institutionalist and worships the process of deal-making and compromise. He was criticized by the left for his record of getting corporations & Wall Street on board with incremental progress.
People in this industry get so twisted up over a few campaign promises or one single pipeline or patch of land. That's theater, and you should all know better. Look at the actual *track record*. Obama & Biden auctioned off tons of federal land for drilling, and stood back and let the Oil field boom with all of the Federal Reserve's cheap credit at the time. They even opened the Atlantic shore for exploration!
I'd bet you $100 that US Oil production in 2024 will still be over 9 million b/d
And with outstanding debts approaching $1 trillion and a breakeven price of between $60 and $65 a barrel for most drillers, US shale oil could hardly expect to stage a comeback soon (or probably ever).
While President-elect Biden will tighten the environmental laws on methane emissions from fracking which President Trump irresponsibly loosened to help the shale oil industry, he will do his utmost to maintain the integrity of whatever is left of the shale industry because if its importance to both the US economy and employment.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London