Bloomberg Businessweek May 16, 2020 pp30-34 POLITICS “The Sticky Politics of Cheap Oil”. “The collapse in oil prices and Texas’ pain could reshape the electoral map in November”. THE BOTTOM LINE “Added economic misery from the crash in oil prices could cost President Trump votes in Texas, while Joe Biden is in a bind appealing to energy workers in Pennsylvania, a swing state”.
West Texas Intermediate crude futures, November 2020 have fallen from a peak of ~$52 on February 11 to ~$24 early in May but meanwhile Natural gas futures, November 2020 have increased from ~$2.25 to ~$2.60 recently. Therein lies the framework for the impact of energy business on the 2020 presidential election.
Overwhelmingly voters favor low prices at the pump which are a result of lower demand (COVID-19) and the market being flooded by Russia and Saudi Arabia. Texas, Louisiana and New Mexico are the largest oil producing states. So, they are experiencing a double “black swan” event with COVID-19 and plunging oil prices. “Texas, the epicenter of America’s oil and gas industry, has borne the brunt of the price crash”. Unemployment has increased from 3.5% (Texas ranked 30th) to 4.7% in March (Texas rank fell to 15th) and likely will go higher. Most of the job losses were in production but Halliburton is laying off 1,000 from its HQ in Houston as well. Conversely, Pennsylvania may benefit by the decline in natural gas from oil fields as their “Marcellus Shale” region that produces huge amounts of natural gas by fracking. “Rising natural gas prices are a thin silver lining for the Keystone state, among the hardest hit by the coronavirus”.
Biden benefits from being pro-union but is tied to a party largely in favor of the “Green New Deal” that forecasts, at best, a limited future for fossil fuels. Trump benefits from being viewed as a “pro-fossil fuel president” but is tied to a party that’s anti-union. For Trump the idea of bailing out the fossil fuel industry is probably DOA-voters don’t like the idea and neither does the American Petroleum Institute. For Biden, he has to articulate the importance of O&G currently and soften the rhetoric regarding the Green New Deal. Besides production O&G production jobs, O&G cuts across many industries from manufacturing and logistics. Any transition away from O&G will be decades converting to new technology supply chain, logistics and jobs.
A recent poll shows Trump and Biden tied in Texas. Trump won Pennsylvania by 0.72% in 2016 against Hillary Clinton but Joe Biden, born in Scranton PA , “doesn’t have the kind of baggage that Clinton carried in 2016”.