Emergency or policy? Unpacking Trump’s take on US energy and metals

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Jeff Mower:

Hello and welcome to the Commodities Focus podcast by S&P Global Commodity Insights, where today we will be discussing the market implications of US President Trump's first few days in office.

I am Jeff Mower, director of Americas Oil News, and I'm joined today by senior policy editors, Eamonn Brennan, Maya Weber, and Kate Winston, and by senior editor and co-host of the Energy Evolution podcast, Taylor Kuykendall.

Within hours of being sworn in as the 47th President of the United States, Donald Trump issued a series of executive orders and declared a national energy emergency. Trump said he is aiming to ensure reliable energy supplies and position the US as a leading producer of non-fuel minerals. He said that energy and critical minerals, "leasing, development, production, transportation, refining and generation capacity of the United States are all far too inadequate to meet our nation's needs." Trump also said while signing these orders that he would impose a 25% tariff on all imports from Mexico and Canada, both major exporters of crude to the US starting February 1st, and that the US would probably stop importing crude from Venezuela. And later in the week, Trump said he would pressure OPEC to lower prices by raising output.

It was quite a bit for markets to digest. At the time of this recording, NYMEX crude was trading around $74.50 a barrel, that was down around $3 a barrel prior to the inauguration. Although I should say there are other things playing into that in that market move.

So Maya, let's start with you. What do you think of these Trump's emergency declarations? What does that even mean? What powers does that give Trump or his agencies in pushing through his agenda?

Maya Weber:

Okay, Jeff, I think you've asked the $64,000 question that everybody is wondering about. The president can make an emergency declaration under the National Emergencies Act, but exactly what powers this is going to wind up unlocking, that's going to be determined down the road once they start coming back with specifics, but it could unlock emergency powers under a host of statutes. At this point, we're just at the stage where he's asked agencies to identify what emergency powers they had in their existing statutes. Could he do something under the Defense Production Act that could somehow be waived with national security authorities? Could he use emergency powers under the Federal Power Act to help some source of generating resources? There's a lot really still to be determined.

Jeff Mower:

Yeah, it's a funny thing. It's not like, I mean he talks about wanting to boost production by the equivalent of three million barrels a day, so not necessarily crude. So it's not as if he could just order oil producers to start boosting production. There's how many oil producers? I mean, it seems to be more like going to the agencies and saying, "What sort of regulations could you remove? What sort of barriers could you remove to get more production online?" That's the impression I'm getting from these orders so far. Does that sound about right?

Maya Weber:

Well, yeah, and I think we get some hints of what he's interested in from looking at the orders. Yesterday he was talking at Davos about wanting to use this so that you could build generation quickly or get approvals quickly for generation that would supply data centers and AI facilities. And it's not really clear what authorities he would use for that, but that at least seems to be one of the desires.

Jeff Mower:

Are there any projects that you see would benefit from this right away? I can't think of anything on the oil side. Maybe something on the Gulf Coast export terminal front.

Maya Weber:

I think it's really speculation at this point to think about very specific projects. But you could imagine situations where a natural gas project is at risk of being shut down because of a court order where they might come up with a way to try to use that. But it's really, the devil is going to be in the details about the legal aspects of it, because generally the emergency authorities had been used in more situations of imminent emergencies rather than sort of a longer term concern about generation supply adequacy or something along those lines.

Jeff Mower:

Yeah, that's one thing that really stuck out. I mean, the ability to call this an emergency, right? Calling something an energy emergency when it's really just your policy preferences. I mean, there's no shortage of crude in the US. There's no shortage of crude globally. If anything, there's too much crude, which is why OPEC has been shutting in production. But anyway, we can get a bit more to that later.

Taylor, I'm curious, on the metals front, what that means for metals.

Taylor Kuykendall:

Yeah, I'd love to kind throw in something here on the side of it was we talk about these new projects. Something that kind of caught my ear at Davos yesterday, we actually heard Trump talking about using coal as backup power for a power plant that was going to be built near an AI facility. That was fascinating as a reporter on my end, we haven't seen a new coal plant built in the US in over a decade, and it's hard to tell how much of this is, has he talked to somebody that's working on a project in this field or is this maybe just kind of throwing an idea at the wall? But we didn't hear much about coal during the most recent campaign, even though that was a huge feature of Trump's first campaign. And I don't think we'd heard the phrase beautiful, clean coal in a while, but he brought it back at Davos. So I think I'm back to trying to paying attention to maybe what Trump might try to do for new coal plants. He couldn't save the industry in his first run, but maybe he has some different ideas and another set of tools to try to deploy this time around.

Jeff Mower:

What about on the metals front? I mean, he was really concerned about critical minerals.

Taylor Kuykendall:

Yeah, so kind of on the broader front, I mean, in addition to critical minerals, we're also seeing him take a big attack on trying to save the steel and the aluminum industries. I think we all are kind of familiar with how important that's been to American construction, manufacturing and just as a huge base of the economy. But recently we're hearing more and more about critical minerals. This is this group of metals, some non-metals that are really essential for high-tech products. It goes into renewable energy. Your cell phone has rare earth elements in it and then a slew of other materials. We don't produce a lot of those here in the US. We depend on China for a whole lot of those. And some of his initial orders that we saw come out are aimed at kind of boosting that domestic supply chain. We're seeing things like ordering the government to go out and look for barriers to domestic mining and processing a huge sector of energy and the interior to take some actions including trying to map where some of these materials are at. Ensuring federal permitting is going to go a lot smoother.

And then also, we heard him actually mention this specifically in the National Emergency Declaration that this is important. The order on unleashing energy in Alaska, while I think was a lot about oil, also included a nod to critical minerals. It's going to be an interesting thing to watch, because on the one hand, he wants to see us increase all this stuff domestically, but a lot of that demand is coming from the electric vehicle side of things. And as we know and have heard, Trump is not a fan of electric vehicles and those are kind of competing, I think, with each other.

Jeff Mower:

Yeah, that definitely. Kate.

Kate Winston:

Yeah, you mentioned critical minerals and that sort of brings up the potential tariff war with Canada and Mexico. The Canadian energy minister, Jonathan Wilkinson, was recently in the US trying to stave off some of these tariffs. And he talks a lot about, "Hey, Canada has uranium. Canada has a lot of critical minerals. Wouldn't you rather be working with us on that than getting it from China or from Russia, in the case of uranium." So the critical minerals part could play into those tariff threats and sort of negotiations around those as well.

Jeff Mower:

Yeah, and that's where it gets a little confusing with Trump probably wants lower prices, want more production, lower prices, but then he also wants to put these tariffs on Canadian. I think also at Davos, he said that, "We don't really need Canadian oil. We're not dependent on them." But the Midwest refiners especially are very dependent on Canadian oil, right, Kate?

Kate Winston:

Yeah, exactly. Both Canada and Mexico are big crude suppliers to the US. Looking at the Energy Information Administration, they say that for week ending January 17th, Canada supplied 4.3 million barrels a day of crude to the US, and then for Mexico they supplied about 244,000 barrels a day of crude to the US. So they're our two biggest crude suppliers, and in particular in the Midwest, the refineries have been designed to run on Canadian crude, and they would have a hard time finding alternatives, because the pipelines from the Gulf of Mexico, they don't flow to the Midwest right now, and the tax would really hit Canada pretty hard, because they don't have a lot of other options where they can send their crude. So actually the Canadian Energy Minister suggested that this 25% tariff could increase Midwest gasoline prices by up to 75 cents. So it could have an impact on some US prices as well.

Jeff Mower:

Yeah, I could see that happen and that's got to be a concern, if you're trying to keep gasoline prices low. It's interesting, to your point, the Midwest refiners don't have a lot of options, and it's kind of funny, because Canada, the producers also don't have a lot of options, like you pointed out. So I think when I've spoken to analysts here, they think, well, maybe that tariff would be sort of split up in a way. Okay, so refiners would pay more, but also maybe discounts would deepen for Canadian crude, like producers would take a cut, they would be willing to sell at a lower price as well.

But absolutely the price we get passed on, I would think, to consumers to some extent. But I do think this is interesting, I was just looking up some prices. I mentioned WTI prices earlier, but I was also looking up the Western Canadian Select, which is sort of the benchmark heavy Canadian crude that comes out of Alberta. And the most recent price we have is like a $13.50 cent discount to WTI, which isn't that big of a change over since say summer, since there was a trans-mountain pipeline expansion, which is allowing more crude out of Canada from the Pacific coast into Asia, and that helped narrow the discount quite a bit. But since then, it's been very range bound and that tells me the market is really waiting for the details, kind of to Maya's point earlier.

We're not seeing the market really respond to these tariff talks yet, which makes sense, right? Because why go out there and buy or sell at a different price if you think a deal could be made tomorrow. Or the February 1st deadline could be pushed to March or April.

On the Alaska front, Taylor, you had mentioned Alaska, Eamonn, you've been covering that. Trump removed, or you should say revoked some orders that Biden had put in place that removed some acreage from oil and gas drilling. What details do you have there if you could explain that, the acreage that was removed?

Eamonn Brennan:

Sure. Yeah. So in and of itself, it was interesting that the Trump administration issued an executive order specifically relating to Alaska's energy. It wasn't folded into the broader energy emergency or other executive orders, so it's clearly a priority. The Biden administration last year took 28 million acres of the Arctic National Wildlife Refuge off of availability for leasing. It was hailed by environmentalists. In April of last year, they closed over half of the 23 million acre National Petroleum Reserve, Alaska to drilling and development for oil and gas. And then the additional sort of parts of the Alaska Executive Order had to do with coastal plane leasing plans, instructing agencies to look at those various environmental studies that sort of were the underpinnings of reasons for taking Arctic National Wildlife Refuge acres out of development eligibility. Basically everything the Biden administration did in Alaska is now up for reversal. Obviously that takes time. It doesn't happen overnight. You couldn't suddenly buy a lease today just because of the executive order, but it instructs agencies to go back, look at every policy from the past four years, decide whether it's in line with the new policy, and then issue rulemakings and old comment periods to that effect.

There's also the withdrawal of 625 million acres of US coastline from offshore drilling. That includes the east coast, the west coast, the eastern Gulf of Mexico, and some acres off of Alaska's coast as well. So that goes also into the Alaska piece of the executive order in addition to federal lands and the wildlife refuge and preserves.

Jeff Mower:

Yeah. Maya, it looks like you're going to ask a question or comment on that.

Maya Weber:

Well, on the subject of reversals of Biden administration policies, there were a lot of them as it relates to things that affect permitting of energy projects, and particularly conventional and fossil fuel projects. So I didn't want to downplay the effect of these orders when you put it all together, because there really was a big kind of turning around of the ship and telling all of these agencies to really prioritize efficiency in issuing permits, and they essentially in one fell swoop got rid of a whole bunch of these climate executive orders, environmental justice, executive orders, et cetera. Even instructed agencies when they do the permitting to prioritize efficiency, not the activist's agenda, I mean they put that in writing. And so, I think there really is an effort to clear away some of these considerations like climate considerations that have been the focus of a lot of litigation that's slowed things down. So even though it's all kind of in early stages of telling the agencies to start doing this, I think it's a pretty clear message from above.

Jeff Mower:

Yeah, that's one thing. I know we're talking about this a while ago before we even start recording, which is like when Trump talks about boosting production of anything, how much of that is more of a concern or more of a desire to lower the burden and lower the cost of production? If you can lower the cost by removing regulatory burdens or any regulations, does that just help the US become more competitive in any of these? In oil, gas, and metals? I can't help thinking that's part of it, especially when it comes to the geopolitical, what would I call it? Tool that gives Trump or any president, oh, Eamonn, go ahead.

Eamonn Brennan:

I was going to say this is what's really interesting about Alaska is, it is the kind of place where you need to incentivize production somewhat heavily. It's logistically very hard to produce oil in Alaska. It's politically very fraught, even more so than anything in the Gulf Coast. The environmental focus on Alaska is really profound. And so, the subject of, is there actual industry interest in developing in Alaska, even if you remove all of these potential roadblocks in a regulatory sense, and I think there's a little bit of dispute right now in the industry. I talked to Mike Summers, the CEO of the American Petroleum Institute at an event earlier this week, and he's insistent that yes, the industry interest would be there if there was durable, bipartisan, congressionally mandated policy that oil companies knew what was going to last beyond the next presidential term. But when you see-saw back and forth every four years, or even every eight years, when you're looking at ConocoPhillips's Willow Project, which Biden eventually approved, is not yet producing but is on its way. It took them a really long time to get that off the ground. Biden took a big political hit for allowing it. It's not a popular project among environmentalists and is a focus of their ire.

And so you have to, beyond issuing executive orders, or agency rule makings, or changing the landscape in the next four years, actually getting more production from Alaska is going to take a much more different and more lenient environment for the next 10, 15, 20 years. If you really want to find the kind of large scale oil producing field that's going to, for example, if the Permian peaks and then levels off is going to be the next sort of source of large American oil and gas production.

Jeff Mower:

Yeah, that's an interesting point. I can't help thinking, as these emergencies are being declared, is this going to happen every four years? Let's say the Democrats come in in four years and they declare a national emergency on climate change, right? And they issue a bunch of executive orders and they reverse Trump's like, how long do these orders? And that can't be good to your point on any kind of investment, and it can't be good on investment in clean energies as well. Right? It's like if you're in the clean energy sector, you want some stability there as well, I would imagine. And so what I wonder is with all these orders, how long do they stick around? A couple of the orders that Trump reversed were just issued by Biden earlier in January. So when those orders are released, is there a mechanism there saying, okay, that order is in effect for X amount of days or years, and can't be legally reversed until something happens I guess. Otherwise the orders seem a bit arbitrary, or the power does.

Eamonn Brennan:

The one that looks like it's probably going to end up being permanent is the 625 million acres of offshore that Biden withdrew from leasing, because the actual congressional power involved there granted to the president is that you can withdraw, and this is something Trump challenged in his first term on a previous Obama withdrawal, is the president has the ability to withdraw waters and lands from leasing under the Outer Continental Shelf Act, but doesn't have the ability to put them back. And that's any president, whether it's your own. If Biden decided, actually, I'm going to put those back on a week later, he doesn't have the power to do that. Subsequent presidents don't have the power to do that. And so, that might actually be permanent, and that's something that the oil and gas industry was pretty upset about because that's not even something you can get back when you get a Republican elected to the White House. So that's probably a permanent one. The rest, you have to go through the rulemaking process, but within a year, two years for Biden, some of these took a little bit longer than that. If it's expedited, it might be within a year, then you'll have new final rules and then those will be in effect. But for now, the Biden stuff is still in effect, at least for the next year or so.

Jeff Mower:

Yeah. So Taylor, when we're talking about metals, what kind of like, when Eamonn was talking about the appetite for oil producers to actually invest in a project, what's the appetite like on the metals front? Is there an economic reason why you're seeing more development overseas than in the US?

Taylor Kuykendall:

Yeah, I mean, there's a lot of different factors go into that, and it really depends on which metal you're talking about, but a lot of it comes back to the permitting is really difficult in the US. That's something that I think that they would really like to see solved. And for a long time, I think we just kind of were comfortable depending on China. And then in recent years, people have gotten more and more wary of that, and we're starting to see that reverse. But now there's all kinds of just other challenges that just kind of come with being several years behind. But one of the things that I would come back to in this idea of the oscillating administrations and that changing the political wins for these different fuels, it reminds me of, what was it, eight years ago, I was at a coal plant and I heard Rick Perry, the secretary of energy at the time, say that if you put the supply out there that the demand will follow. This idea that if you can increase supply a lot, people will just start buying coal. And sure, there's something to the idea that if you put a lot of supply out there, things become cheaper. Maybe that drives something.

But I think this is kind of the same deal here that we're going to see is you can't just see people increase a lot of supply. For that coal example, that we mentioned earlier when he said about putting it in as a backup power for a power plant, you're not only going to spend a lot of money on something that's kind of proven to be one of the more expensive fuel options out there right now, you're also betting several hundred million, maybe several billion that in four years you don't have a president that cares about greenhouse gas emissions, which I think is a pretty big bet to try to make, honestly. So, yeah, so much of this is driven by markets, and of course regulations matter, but only to a certain degree.

Maya Weber:

And I was just going to add Jeff, as to your question about the ping-ponging and what that does for the investment climate that I had gotten sort of unsolicited a comment from a lawyer who helps energy companies figure out their risk that this idea that you're turning back on some of the incentives that some of the clean energy developers thought they had could also be a bit chilling for some of the investors on the fossil fuel side as well, with the notion that do we really have permanence here?

But the other point I did want to make is that I think Trump, to some degree, has a partner in Congress. So to the extent that the Republican Congress can, with the slim majority in the House and whatnot, I think they'll try to make some of this more permanent and see what they can do in reconciliation and whatnot. I mean, I have been hearing that, for instance, with the emergency order that in some cases it could be that Congress would try to give that additional authority so that it was clearer under certain statutes that if you had these emergency powers that yes you could waive, for instance, certain environmental laws.

Jeff Mower:

I did want to touch on sanctions a bit as well. Kate, he hasn't really talked much about sanctions. He did threaten to put additional sanctions on Russia this week, but otherwise he's been kind of quiet on Iran and Venezuela. Is that the case?

Kate Winston:

Yeah, yeah, that's right. He threatened tariffs and taxes and sanctions on Russia, and if they don't come to the negotiating table to end the Ukraine War. From the people I've talked to, the US really doesn't buy that much from Russia, so tariffs would not be very effective. It would be mostly sanctions, but there does seem to be some options there if he decided to go that route, and that could give Ukraine more leverage in any kind of talks.

On Iran and Venezuela, yes, he's been more quiet. He mentioned that we would probably stop buying Venezuelan oil. He said, again, "We don't need it." So it's a little unclear whether that is a reaction to Maduro taking office as president again, widely seen as illegitimately. Or if that's just part of his overall narrative of we're going to be producing so much oil that we don't need it from Canada, we don't need it from Venezuela. So it's a little unclear whether that's part of his strategy.

People I've talked to see some competing factions within the Trump administration on Venezuela and how to address it, whether he goes back to maximum pressure sanctions or not, or comes up with some kind of deal to reduce immigration from Venezuela. So it's kind of unclear what track he'll take on that.

On Iran, he's widely expected to be pretty strict and return to maximum pressure there on the sanction side. It's unclear how effective that will be since there's a very elaborate shadow fleet now that can kind of go around sanctions. It would have to probably go more into secondary sanctions on the buyers of Iranian oil.

I will note that Trump did redesignate the Houthi rebels in Yemen as a foreign terrorist organization. Biden had taken that off for humanitarian reasons to get aid in. So he put that back on and that could say no, that he's willing or planning some more efforts around Iran's proxies in the region, as well as probably tighter sanctions on Iran's oil.

Jeff Mower:

I thought it was interesting too, a week or so ago that China's Shandong port, which is a major entry for crude, for refining, it said it would no longer bring in or allow sanctioned vessels. And that's a big deal, because that's Iranian, a lot of Iranian crude is brought in there. And I thought that was a possibly a way for China, Beijing to signal, okay, we're willing to play ball here on the Iranian crude front, maybe because there's negotiations going on in the background over tariffs against China. And that could be a way of saying, because that's important, the ability to cut off, to get buyers to stop buying Iranian crude, even with the shadow fleet that you mentioned.

Kate Winston:

Yeah, and one thing is Congress did pass legislation last year called the SHIP Act that gives more authority to put sanctions on ports that are buying or allowing Iranian oil in. So that may be one thing that Trump uses, and that may be part of China's calculations there.

Jeff Mower:

All right. Okay. Well, thanks everyone. Thanks Kate. And thanks Maya, and Eamonn, and Taylor. And thank you to our listeners for tuning into this episode. We will be covering these developments closely. For more on our coverage, please check out the links in the podcast description. This episode of the Commodities Focus podcast was produced by Jennifer Pedrick in Houston.