Energy

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

It's Election Day and energy doesn't matter. That's a hard thing for me to write, obviously. But, honestly, when energy is this cheap, it's hard to get Americans to focus on it. See how different things are from four years ago?

Moved On
Major fuel prices have fallen substantially since the last presidential election
Source: Bloomberg
Note: Generic 1st futures prices. Performance indexed to 100.

It isn't just that fuel prices have collapsed. If you bought a new car during Obama's second term, you're likely to get further on each gallon (and each hour of wages -- see this).

Those lower prices show the next president's energy policies will be shaped, in part, by relative abundance rather than scarcity (at least for the some of their first term). Whereas energy ranked 7th among registered voters' concerns when they were surveyed by Pew Research Center in April 2012, it didn't even make the list in July 2016

What this means in practice will depend, of course, on who wins today, up and down the ticket. But while "drill, baby, drill" no longer has quite the same ring as it once did, it still does stir passions -- just in a different way.

In November 2012, when gasoline cost more than $3.50 a gallon, on average, that slogan from 2008 was one to which much of the driving voting public could still relate. These days, with pump prices more than a dollar lower -- and natural gas a case study in what cheap debt and better technology can do to a commodity -- it has more resonance in those areas of the country that actually produce the stuff and have suffered big job losses. Conversely, states where energy figures less in the economy are less bothered. You can probably guess how this intersects with the party divide, but ClearView Energy Partners, a DC-based analytics firm, has helpfully crunched the numbers:

Burning Red
Republican states are more heavily tied to the fortunes of the oil and gas business
Source: ClearView Energy Partners
Note: Data show average contribution of oil and gas production to state GDP in 2014. States are classified according to "Cook Political Report" projections as of October 17th, 2016. States designated as "lean R/D" or "toss-up" classified here as "Battleground".

Republican states also tend to use a lot more coal-fired electricity and, in general, devote slightly more of their paycheck to energy than blue states. Unless there is a marked increase in fuel prices, this divide will grow starker, given the opposing positions of Hillary 'half a billion solar panels' Clinton and Donald 'Chinese climate hoax' Trump.

A Clinton presidency would, in general, portend more pressure on fossil fuels and support for renewable energy. But avoid placing too many bets on that simplistic view. How quickly her administration would move in this direction depends a great deal on the outcome of today's senate races and elections for state legislatures. The likeliest path would be an extension of President Obama's approach, potentially with the Environmental Protection Agency extending limits on greenhouse gas emissions from the power sector to industrial users -- such as, say, oil refiners. Unlike a carbon tax, this wouldn't require new legislation. Along with continuing strictures on access to federal lands and perhaps tighter regulation of methane emissions, the oil and gas business would face growing limits to its expansion due to higher costs.

Trump, meanwhile, is avowedly pro-fossil fuels. Yet how this would play out in practice isn't clear. This is in part because, as Sarah Ladislaw of the Center for Strategic and International Studies put it so diplomatically in a recent report published by Chatham House:

Trump has said little about his positions to date and he has virtually no track record in this area to analyse. This, along with evidence that he is willing to change his mind on issues very quickly, may mean that his stated policy positions and apparent preferred issues could change when confronted with unexpected circumstances or opportunities.

Even leaving this aside, though, would policies encouraging more drilling help at this point? The Permian shale basin's prolific output and new discoveries such as Apache's Alpine High find underline the fact that abundant reserves are part of the problem for anyone employed in the E&P business -- this industry is in a classic bust following a classic boom. Even Trump's own own energy lieutenant, Continental Resources CEO Harold Hamm, called on OPEC to restore the fortunes of oil producers (an oddly anti-consumer position, but then it's been an odd year).

Still, Hamm's call underlines the fact that, whoever wins, reviving oil and gas drilling in the near term will be largely in the global market's purview, not that of the Oval Office.

The outcome of Tuesday's voting still matters for the shape of the energy market longer-term -- largely because, even if gasoline prices aren't a hot topic, things such as earthquakes in Oklahoma, pipeline protests, power-plant closures, and solar-power incentives generate plenty of headlines (great for me, obviously). And that divide between fossil and non-fossil states isn't going away, either.

Exactly how the votes matter will be a bit clearer in less than 24 hours. Until tomorrow, then.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in New York at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net