BAKU, Azerbaijan, Nov.4
By Leman Zeynalova – Trend:
Although a Biden win in the US elections could benefit short-term demand, his approach to foreign relations could bring more supply to the market, thus a conservative oil-friendly Trump win could be the most bullish immediate outcome for oil, Trend reports citing Rystad Energy.
“While we believe a Biden administration could be bearish for supply reasons, we find that his presidency would be bullish for demand in the short term. If Democrats were to take complete control of Congress and the presidency, we expect that one of their first priorities would be to pass a hefty economic relief package. An additional $1 trillion in incremental stimulus in the US would translate into roughly 400,000 bpd of increased oil demand in 2021.
“Besides the stimulus, trade relations with China could be another area where a Biden presidency could be positive for short-term demand. One key sign to watch will be who Biden appoints to US trade representative. If he appoints a representative from the progressive wing of the Democratic Party, that could signal that tariffs—and protectionism— might be here to stay. However, if he appoints someone more in the mold of Clinton / Obama-era trade policy, we expect that trade barriers may be lifted after some sort of concession is extracted from China.
“In our view, the ongoing trade war has cost the oil market approximately 300,000 bpd of maritime oil demand through 2019, as well as additional consumption impacts. Thus, a similar amount of oil demand could be expected to return if trade relations between the US and China are normalized, which we believe could happen as early as 2021.
“If Biden goes with a “return to globalization” trade policy, this also carries upside potential long-term oil demand growth in emerging markets. A step back from the brink of a trade war could have a GDP growth impact between 1-2 percent and add 500,000 bpd of oil demand globally by 2025.
“However, beyond the short term, the demand picture under a Biden presidency looks less bullish. The candidate has stated that on “Day 1” he will implement fuel economy standards that aim for 100percent of new sales of light-and medium-duty vehicles to emit zero emissions. Although it is unclear by what year this goal would be achieved, a Biden administration would certainly at least reverse the Trump administration’s rollback of fuel economy standards, and potentially significantly strengthen such regulations. We expect that over time, a return to Obama-era fuel economy standards would lead to 500,000 bpd of lower oil demand by 2025.
“In addition to stricter fuel economy regulations, Biden has pledged approximately $400 billion in clean energy innovation and investment over the next ten years as part of an overall $1.7 trillion climate plan. If Democrats take control of Congress, we expect them to incentivize electric vehicle sales and to invest in charging infrastructure. Specifically, Biden has pledged to increase cash incentives for switching to electric vehicles, similar to the 2009 “Cash for Clunkers” program. In addition, we expect a potential green stimulus plan would include investment in high-speed rail, one of Biden’s famously favorite mediums of transport, which could dent jet fuel demand,” said the company.
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