Trump's Iran Decision Continues His Efforts To Reverse The Obama Energy Policy Legacy
The energy media is full of hyperventilating predictions of $100 oil this morning in the wake of President Donald Trump’s announcement that he is ending U.S. participation in the Iran Deal, which was implemented in 2015 via an executive agreement by then-President Barack Obama. At least one analyst is even predicting we could see $300 oil prices by 2020, all due to this single presidential decision.
All of which is nonsense, as Chris Helman so ably detailed in his piece at Forbes yesterday afternoon. The world is indeed “awash in oil,” as Chris says, and at most, the U.S. withdrawal from this agreement might mean that as much as 300,000 – 400,000 barrels of Iranian crude could be restricted from going onto the market by the end of 2018. Even that is a big “if”, because, as Treasury Secretary Steve Mnuchin pointed out late on Tuesday, the President’s decision to renew sanctions on Iran does not necessarily mean that the U.S. has even actually “pulled out” of the agreement.
What it does mean is that President Trump is putting renewed pressure on Iran and the other signatories to the agreement – France, Great Britain, China, Russia and others – to renegotiate the terms of the deal in a way that Mr. Trump considers more favorable to U.S. interests and goals. I’ve pointed this out several times before, but it bears repeating here again: President Trump views every major decision as a negotiation. This is how is mind works, it is how he has conducted his business dealings throughout his entire adult life, and it is how he has conducted his presidency.
Unfortunately, many analysts and reporters appear to be simply incapable of factoring this reality into their analyses and reporting, and so we see the kind of wild speculation and doom-saying we’ve seen over the last 24 hours.
Here’s the thing to realize: It is not in President Trump’s best interests for oil to go to $100/bbl. The U.S. economy is currently cruising right along under his policies, and he has no interest in slowing that down. Nor is it in the best interests of Saudi Arabia, Russia or the other OPEC countries who are signatories to their joint agreement to limit exports. Sustained high oil prices will inevitably slow the global economy and ultimately result in demand destruction for the product.
Ford Motor Company recently announced that it is going to discontinue the production of most of its lines of sedans and compact cars and focus on producing pickup trucks and SUVs, because those are the cars the public currently wants to buy. This was great news for oil-producing countries. It is in the best interests of Saudi Arabia and Russia to keep Americans driving those SUVs and pickup trucks – a return to $100 oil for any sustained period of time would mean a return to demand for small cars that don’t burn nearly as much gasoline.
Thus, we are much more likely to see a renegotiation and renewal of U.S. participation in the Iran Deal by the end of 2018 than we are to see an oil price remotely approaching $100 per barrel.
To me, the biggest news about all of this is just how easy it has been for Donald Trump to almost completely erase the Obama energy policy legacy. Think about the reversals we have seen in just the last 16 months:
- Obama set-asides of vast swaths of public lands and waters in the Western states and Alaska – reversed;
- Obama policies designed to slow and restrict federal lease sales for oil and gas exploration – reversed;
- The Bureau of Land Management hydraulic fracturing and well completions rule – rescinded;
- The Interior Department’s proposed royalty rate increase on federal onshore leases – rescinded;
- The Obama-era slow-walking of permitting for LNG export facilities – reversed;
- The EPA Waters of the United States massive expansion of authority under the Clean Water Act – suspended and being rewritten;
- The Obama Clean Power Plan – rescinded;
- U.S. participation in the Paris Climate Accords – ended;
- U.S. participation in the Iran Deal – suspended pending renegotiation of terms.
Note that this is far from a comprehensive list. One of the main reasons why the Obama legacy on energy policy – and other areas as well – has been so easy to reverse or suspend is because pretty much none of it was implemented via statute or formal treaties. Those are the means by which the Constitution intends for major domestic policies and international agreements to be permanently implemented. They are much harder to achieve, for good reason.
Mr. Obama chose to commit the U.S. to both the Paris Climate Accords and the Iran Deal via an executive order, thus short-cutting the formal process of obtaining treaties via approval by the U.S. Senate, which he knew he would not receive. The problem with executive agreements is that they can easily be reversed by the next executive.
Thus, U.S. participation in the Iran Deal becomes just the latest step in Mr. Trump’s ongoing effort to keep his campaign promise to reverse the Obama legacy. The only real surprise in all of this is that the action came as a surprise to so many.