Throughout the entire 2016 election cycle, energy issues have been relegated to the sidelines despite their importance to the economy, foreign policy, and national security. At last night’s presidential debate in St. Louis, energy did come up, but not until the very end, after nasty exchanges over Republican nominee Donald Trump’s lewd comments on women, tax policy, strategies over Syria and ISIS, and healthcare. Even when energy was the focus, both candidates gave relatively short responses to a question from Kenneth Bone, an undecided voter in the audience who has quickly become something of a celebrity overnight. Bone asked: “What steps will your energy policy take to meet our energy needs, while at the same time remaining environmentally friendly and minimizing job loss for fossil power plant workers?”
During the exchange with their answers, Democratic nominee Clinton committed her one big policy gaffe of the night, while Trump exaggerated the idea that oppressive regulations are the problems for the country’s energy woes.
According to Politico, Clinton made two falsehoods during the debate (compared to Trump’s 13), one of which had to do during her answer on energy (the other was saying that Trump has never apologized). Clinton stated the U.S. is “energy independent” and doesn’t rely on the Mideast Gulf oil producers. “You know that we are now for the first time ever energy-independent. We are not dependent upon the Middle East,” she said.
Although the U.S. has reduced dependence on crude imports from OPEC and other foreign producers thanks to the shale production boom, the country still imports more than 7-8 million barrels per day, or roughly 45-50 percent of total refinery demand.
That is not true. Although the U.S. has reduced dependence on crude imports from OPEC and other foreign producers thanks to the domestic shale production boom, the country still imports 7-8 million barrels per day, or roughly 45-50 percent of total refinery demand. Within the past decade, the U.S. would often import more than 10 mbd. Right now, the U.S. takes in about 3.5 mbd from OPEC suppliers, and 1.8 mbd of that is from Middle East and North Africa producers.
Clinton’s statement about the power of Middle East producers in the global oil market, however, was spot on. “But the Middle East still controls a lot of the prices. So the price of oil has been way down. And that has had a damaging effect on a lot of the oil companies, right?”
Correct. The strategy of Saudi Arabia, which has some of the lowest production costs in the world, sought to undermine U.S. shale oil companies in its November 2014 decision to keep supply elevated and drive down prices. As a result, more than 100 U.S. oil producers have gone bankrupt, and most others are still hemorrhaging money. Clinton reiterated the importance of energy independence, an elusive presidential goal since Nixon in the 1970s. “It [energy independence] gives us much more power and freedom than to be worried about what goes on in the Middle East. We have enough worries over there without having to worry about that,” she said.
“The Middle East still controls a lot of the prices. So the price of oil has been way down. And that has had a damaging effect on a lot of the oil companies, right?”
Trump, in his answer, said that the Environmental Protection Agency (EPA) under Obama has killed the energy industries in the country. “Energy is under siege by the Obama administration. Under absolute siege,” the real estate mogul and former reality TV star said. “The EPA, Environmental Protection Agency, is killing these energy companies. And foreign companies are now coming in buying our—buying so many of our different plants and then re-jiggering the plant so that they can take care of their oil.”
Energy is a big industry in the US but Trump was probably referring to the big three: oil, gas and coal. The current problems that oil and gas companies face in the U.S. have more to do with global market dynamics than the EPA. The oil and gas industry had one of its biggest, if not largest, booms ever while Obama has been in office. While the boom was driven by private sector innovation and investment, the federal government has taken a largely hands-off approach to regulating the fracking boom. Sustained high prices enabled the fracking boom to take off even as motorists had to deal with skyrocketing gasoline prices. The subsequent price collapse has left fracking companies reeling. The important point is, for companies in the oil and gas sector, that global market dynamics are often manipulated in ways that damage either U.S. consumers, the domestic oil and gas industry, or both.
The current problems that oil and gas companies face in the U.S. have more to do with global market dynamics than the EPA.
As for coal, Trump mainly singled out Obama for wanting to kill off the industry. While the administration is careful not to say it is at war with coal, it is fair to say that the stricter regulations both imposed and proposed by Obama’s EPA, through his climate agenda, put the coal industry’s viability into question. But it should also be said that the shale revolution and the abundant cheap natural gas that it has produced, as well as falling prices for solar panels, have been major drivers of coal’s decline in the U.S. and globally. Regardless of the federal administration, the coal industry is facing significant market headwinds. Mr. Trump didn’t give specifics about foreign entities buying “so many of our different plants” to support their oil interests. Countries such as Venezuela and Saudi Arabia have held refining assets in the U.S. for years.