Trump administration swift to act with America First Energy Plan

The America First Energy Plan states that ‘President [Donald] Trump is committed to achieving energy independence from the Opec cartel and any nations hostile to our interests.’ Yuri Gripas / Reuters

The first act of the Trump administration after Friday’s inauguration was to post on the White House website an America First Energy Plan, which promises to free America “from dependence on foreign oil”.

The statement of intent also says that president Donald Trump will ditch “harmful and unnecessary policies, such as the Climate Action Plan and the Waters of the US rule,” the former being former president Barack Obama’s detailed 2013 plan to reduce US carbon dioxide emissions and promote renewable energy sources, the latter a 2015 initiative to beef up protection for US waterways from industrial pollution.

The new administration says, however, that “for too long we’ve been held back by burdensome regulations on our energy industry”, pledging to take a more pro-hydrocarbon path.

The statement makes it clear that the new administration will promote policies that favour the domestic shale oil industry.

“The Trump administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans. We must take advantage of the estimated US$50 trillion in untapped shale, oil and natural gas reserves, especially those on federal lands that the American people own,” it says.

The 362-word statement is unclear about policy towards countries from which the US currently sources its oil imports.

On the one hand, it says that “President Trump is committed to achieving energy independence from the Opec cartel and any nations hostile to our interests.” But it adds: “At the same time, we will work with our Gulf allies to develop a positive energy relationship as part of our anti-terrorism strategy”.

The US relies on Opec for about 30 per cent of its oil imports, of which Arabian Gulf countries account for half – or 1.5 million barrels per day – and Saudi Arabia for 1 million bpd of that total.

Imports had been declining until last year, when they rose by 7 per cent as high-cost shale oil was displaced amid the oil price slump.

The main source of US imported oil, however, is Canada, which accounts for 40 per cent of the total, with Mexico, Venezuela and Colombia accounting for a further 20 per cent.

The US relationship with the oil world is a complicated one and its industry is a growing exporter as well as importer. For example, it exports as much oil products as it imports from Mexico, and the US shale industry lobbied hard to win a change in the law last year to remove a 40-year-old restriction on US crude exports.

“His agenda is somewhat contradictory [and his] room for manoeuvre may be limited,” said Paul McConnell, research director at Wood Mackenzie, an industry consultancy.

Domestically, easing tax and regulation on the oil industry would cut the government’s take from royalties while the Trump administration is also promising to spend big on infrastructure.

In any case, said Mr. McConnell, oil prices rather than tax and regulation will determine whether industry invests in new shale production or developing high-cost areas like Alaska.

“From a foreign policy perspective, a perceived bias towards isolationism could reshape key geopolitical relationships with Saudi Arabia and the other Gulf Opec states, including Iran,” he said. “A reassessment of US support for lifting Iranian sanctions could … materially impact oil markets, but the sanctions deal was a global one, and it is doubtful a Trump administration will have the clout to kill it.”

Another part of the energy plan – the intention to promote increased coal use – may also not stand up to scrutiny.

As Amos Hochstein, the US state department’s special energy envoy, points out, the country’s ageing fleet of coal-fired power plants will be shut at a rapidly accelerating rate regardless of environmental policy.

About 150 plants were shut in the past two years and about 90 per cent of the remaining 750 are nearing obsolescence and unlikely to be replaced given coal’s long-term future.

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