Perplexing utterances

March 13, 2017
Something about the US presidency makes holders of the office rash on the subject of energy. To be fair, the job is overwhelming, unforgiving, and eminently political.

Something about the US presidency makes holders of the office rash on the subject of energy. To be fair, the job is overwhelming, unforgiving, and eminently political. And because energy affects everyone and encompasses huge flows of money, it's inescapably political, too. Hence the occasionally perplexing utterances. Still, reality should matter.

President Donald Trump drew predictable criticism when he tweeted praise for processing and LNG investments totaling $20 billion over 10 years by ExxonMobil Corp. on the US Gulf Coast. "Buy American & hire American are the principles at the core of my agenda, which is: JOBS, JOBS, JOBS," gushed a tweet. In a video, he said, "This is something that was done to a large extent because of our policies and the policies of this new administration."

Inopportune timing

ExxonMobil's investments began in 2013. A Mar. 6 White House press release hailing the company's plans noted the inopportune timing-at the end of a paragraph well below this: "President Trump made a promise to bring back jobs to America. The spirit of optimism sweeping the country is already boosting job growth, and it is only the beginning." Credibility of the statement received no lift from its nearly verbatim reproduction of two paragraphs from an ExxonMobil presser. The impression was strong that Trump claimed credit he didn't deserve.

He's hardly the first president to do that. Former President Barack Obama regularly congratulated himself for the impressive rebound in US oil production that occurred during his two terms. Yet policies and proposals of his administration consistently discouraged oil and gas work. The increase in oil production that began at the start of Obama's first term defied his dislike of what he called "dirty energy"-embodied, for example, in his 2016 proposal for a $10.25/bbl "service fee" on crude. But he was happy to boast about the accomplishments of an industry he disparaged when doing so suited the political moment.

Obama's predecessor never claimed credit for an oil renaissance because there wasn't one during his presidency. Maybe it's because President George W. Bush had to watch oil production fall through two terms that he complained of a national "addiction to oil" in his 2006 State of the Union address. When presidents-especially those rare few whose private careers were in oil-say things like that, anything can happen. Bush, in fact, tried to make the improbable happen by promoting the long-elusive hydrogen economy.

Hydrogen's most impressive performance in the energy economy so far is how quickly it vanished from Obama's policy agenda. Obama and his first energy secretary, Nobel physicist Steven Chu, preferred solar and wind. Tax credits and research funding shifted accordingly. The US now spends much money on relatively small contributions of usable energy-however fast-growing-from air dynamics and the sun.

For the 16 years before Trump took office, then, the US had, to varying degrees, treated energy as a matter of political choice. In the meantime, oil and gas markets became glutted. Prices of both commodities now punish high-cost production and encourage consumption. Formerly influential fear about imminent depletion has subsided. And, despite strong growth of renewable alternatives, demand for oil continues to increase.

Oil price increase?

In a new edition of its annual, midterm outlook, the International Energy Agency says global oil demand might reach 104 million b/d in 2022, compared with 96.6 million b/d last year. The growth might strain aggregate production capacity of the Organization of Petroleum Exporting Countries, even with expected increases. Unknown is how much capacity will develop elsewhere-a question no longer geologic but financial. "More investment is needed in oil production capacity to avoid the risk of a sharp increase in oil prices towards the end of our outlook period," IEA warns.

In this ironic light, and given costly policy adventures of the recent past, Trump's cheering of investment in economically sensible energy is at least refreshing. If his hyperbole garbled the details-well, what's new?