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He came in like a wrecking ball but how will oil markets react?

Donald Trump's slew of 'emergency' orders will have a huge impact on the region's oil producers

President Donald Trump, first lady Melania Trump, Vice President JD Vance and his wife Usha Vance attend the Commander in Chief Ball Opec Daniel Cole/Reuters
President Donald Trump cuts a cake with a sword, watched by first lady Melania Trump, Vice President JD Vance and his wife Usha Vance at the Commander in Chief Ball

If there is an energy “emergency” in the US – as President Trump decreed under executive orders immediately after his inauguration – it’s the kind of emergency many countries would die for.

America is self-sufficient in energy for the first time in decades, pumping 13 million barrels of oil equivalent per day; exports of oil and gas are running at all-time highs; and average prices at the pump are at a manageable level of just over $3 per gallon.

Investors are doing very well out of the US energy boom. The S&P energy index – having lagged behind the tech-heavy 500 index for much of the period during and immediately post-Covid – is making them serious money again.

But the new 47th president, much like the old 45th, won the election partly by exaggerating policy issues in order to be seen riding to the rescue, hence the slew of “emergency” orders signed after yesterday’s inauguration.

He repeated his pledge to “drill, baby, drill,” opened the way for a new boom in energy infrastructure by removing regulatory and planning restrictions, scrapped most of President Biden’s “green deal” legislation, and singled out Alaska as the hub of a new era of US energy “dominance”.

Along the way, he pulled out of the Paris Agreement (again), ended leasing federal land to wind farms and promised to revoke measures designed to encourage electric vehicle sales.

All these measures had been clearly flagged on the campaign trail, but to see them all together, on day one of his presidency, was shocking – for many Americans, for energy policymakers in the Middle East and for anybody in the rest of the world concerned about energy security and climate change.

It will certainly spell problems for the region’s oil producers if US oil production rises quickly

How should the rest of the world, and especially the hydrocarbon-rich countries of the Arabian Gulf, react to the threat of a new era of US global energy dominance, as the president foresees?

It will certainly spell problems for the region’s oil producers if, as the Treasury secretary nominee Scott Bessent has promised, US oil production rises quickly by 3 million barrels per day (bpd).

Opec+, the alliance led by Saudi Arabia and Russia, is calculating when conditions will allow the return of 2.2 million bpd of crude to the market as promised last summer; so a glut of US oil would certainly complicate those sums.

It will also affect the price, which has been rising again recently, largely thanks to Biden’s parting shot of much harsher sanctions against Russia.

Trump made no mention as to whether he will continue implementing those sanctions, a decision which probably depends on the progress or otherwise of Ukraine peace talks.

Yesterday Brent fell back below the $80 mark, despite Trump’s assertion that the US government will soon be replenishing its strategic petroleum reserve, which had been used by Biden to help keep gas pump prices low in the election run-up.

There is plenty of doubt, however, whether those extra 3 million barrels will come on stream any time soon.

Even all-triumphant Trump cannot simply order US oil chiefs – who were big paymasters in his campaign – to pump more if the financial or technological means are against it. Nor are they likely to appreciate the aim of some in the new administration to get gas to $1 a gallon at the pumps.

The arithmetic of Opec+ calculations will probably be unchanged when members deliberate again in the spring, by which time the severity of Trump’s global tariff policy will also be clearer, and its effect on economic growth and oil demand.

But, longer term, the fact of new US power will have to be factored in. Some in the Arabian Gulf are looking for an excuse to open the taps to protect falling market share, and Trump’s grand plans could be just the thing.

Climate change denial

Likewise, the new spirit of climate change denial in the White House could empower others in the region to rethink their commitments made under the Paris Agreement and net zero pledges.

Such a decision rests at the highest levels of policymaking in the two biggest regional energy producers, Saudi Arabia and the UAE, which have hitherto been wholehearted in their support of sensible “green” measures – without getting much credit from the rest of the world for it.

You get the impression that it will not take much for them to go along with the Trump line on climate change  – especially as an element of some broader geopolitical realignment in the region – and de-emphasise parts of their various green initiatives.

Global energy markets and the global environment are delicate things, and a gigantic wrecking ball has just been swung through them. The Arabian Gulf must watch carefully where the pieces land.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia