In his penultimate State of the Union address – and first before a Republican-dominated Congress – President Barack Obama declared that the US is ready to “turn the page.” The economic and jobs’ data is promising and America is “ as free “from the grip of foreign oil as we’ve been in almost 30 years,” he stated. Unfortunately, just what that next page holds – especially for the energy industry – was left, more or less, to the imagination. Still, upon closer look, we can glean just enough to develop a clearer picture of what lays in store for energy markets as we move toward 2016
Energy, and the nation’s resurgent oil production, was a major theme of last year’s address. Since that speech however, the price of West Texas Intermediate has tumbled more than 50 percent and producers worldwide are feeling the crunch after years of windfalls. US production is still poised to grow – 100,000 barrels per day (bpd) this year and another 200,000 bpd in 2016 – but many shale plays operate on the fringe of profitability as industry debt, and the need to service such debt, is fueling what is somewhat misleading progress. As such, Obama directed attention elsewhere, toward renewable energy developments and climate change. Of course, though fleeting, Keystone XL made an appearance.
“Let’s set our sights higher than a single oil pipeline.”
Though still a significant talking point for Democrats and Republicans alike, Keystone XL is a dead man walking. The bill, having passed through both the House and Senate, now awaits what will most certainly be an Obama veto. Moreover, falling oil prices may bring an end to the six-year saga regardless of the President’s decision. While growth is projected, Canadian producers are cutting spending and limiting their expectations. It’s not expected to go quietly – Senator Joni Ernst’s Republican response is a testament to that – but Keystone isn’t happening in 2015.
“No challenge poses a greater threat to future generations than climate change.”
In what is the biggest takeaway, Obama is primed to tackle an idea perhaps more contentious than Keystone XL, the evidence of human impacts on climate change.
“Well, I’m not a scientist either.”
In a dig at Republican’s well-versed response to the increasing evidence of climate change, Obama smartly dispelled the notion that that phrase somehow qualifies you to speak on scientific matters.
“I am determined to make sure American leadership drives international action.”
What’s more, America will set the example. The State of the Union comes on the heels of last week’s White House action plan to cut methane emissions – specifically from the oil and gas sector. The new strategy aims to combine voluntary and regulatory measures to reduce methane emissions up to 45 percent over the next decade. Future oil and gas wells will be hardest hit and American Petroleum Institute president Jack Gerrard believes the regulations pose a serious threat to America’s shale revolution and role as an energy superpower. In any case, the EPA will finalize these regulations along with the already proposed Clean Power Plan in mid-to-late 2015. For his part, Obama has pledged to deny any GOP opposition to these green initiatives – an option that underscores his paltry 30 percent success rate with Congress.
President Obama’s State of the Union offered encouragement for an already rapidly expanding renewable energy industry – the solar industry accounted for 1.3 percent of all jobs created in the US in 2014. Still, the issue of fossil fuel subsidies was notably absent. Perhaps discouraged by Congress’ refusal to hear any or all of such proposals, Obama seems to have missed an opportunity to really set America apart as a leader.
First published on www.oilprice.com